HAt Zacks, we provide our members with many different opportunities to take full advantage of the stock market, as well as how to invest in a way that leads to long-term success.
One of our most popular services, Zacks Premium offers daily Zacks Ranking and Zacks Industry Ranking updates; full access to the Zacks #1 ranking list; Equity Research Reports; and premium action screens like the ESP filter on gains. All are useful tools for finding out what stocks to buy, what to sell, and what are the hottest industries today.
The service also includes the Focus List, which is a long-term portfolio of the best stocks that offer a winning and market-beating combination of growth and momentum qualities.
Breaking down Zacks focus list
Building an investment portfolio from scratch can be difficult, so if you could, wouldn’t you take a look at a curated list of the best stocks?
This is what the Zacks Focus list offers. It is a 50-stock portfolio that serves as a starting point for long-term investors to build their individual portfolios. The stocks included in the list are expected to outperform the market over the next 12 months.
One thing that makes the focus list even better is that each pick comes with a full Zacks analyst report. This helps explain why each stock was selected and why we think it’s a good long-term choice.
The portfolio’s past performance only reinforces why investors should take it as a starting point. For 2020, the Focus List gained 13.85% on an annualized basis compared to the S&P 500 return of 9.38%. Cumulatively, the portfolio returned 2,519.23% while the S&P returned 854.95%. Returns are for the period from February 1, 1996 to March 31, 2021.
Focus List Methodology
When stocks are selected for the Focus list, it reflects our enduring reliance on the power of earnings estimate revisions.
Earnings estimates, or growth and profitability expectations, come from brokerage analysts who track publicly traded companies; these analysts work with company management to analyze all aspects that could affect future earnings, such as interest rates, the economy, and sector and industry optimism.
Investors also need to look at what a company will earn down the road. This is why revisions to earnings estimates are so important.
Stocks that receive positive earnings estimate changes are more likely to receive even more upward changes in the future. Take this example: if an analyst raised his estimates last month, he will probably do so again this month, and other analysts will follow.
Using the power of revenue estimate revisions is where the Zacks rank joins the party. A unique and proprietary stock rating model, Zacks Rank uses changes to quarterly earnings forecasts to help investors create a winning portfolio.
There are four main factors behind the Zacks rank: Accord, Magnitude, Upside, and Surprise. Each of these features then receives a raw score which is recalculated each night and compiled into the rank. Using this data, stocks are classified into five groups, ranging from “Strong Buy” to “Strong Sell”.
The Focus list is made up of stocks hand-picked from a long list of companies ranked #1 (Strong Buy) or #2 (Buy), meaning each new addition benefits from a bullish consensus on earnings among analysts.
Since stock prices react to revisions, it can be very profitable to buy stocks with rising earnings estimates. By buying stocks from the targeted list, you are therefore likely entering companies that will have increased future earnings estimates, which could lead to price momentum.
Priority List Spotlight: MSCI (MSCI)
MSCI Inc. provides investment decision support tools, including indices; portfolio construction and risk management products and services; Environmental, Social and Governance (ESG) research and ratings; and real estate research, reporting and benchmarking offerings.
MSCI, a #3 (Hold) stock, was added to the Focus list on October 10, 2018 at $166.96 per share. Since then, shares have risen 159.21% to $432.78.
Two analysts revised their earnings estimate higher in the past 60 days for fiscal 2022, while Zacks’ consensus estimate rose $0.05 to $11.42. MSCI is also posting an average earnings surprise of 5.1%.
Additionally, analysts expect MSCI’s earnings to rise 14.8% for the current fiscal year.
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MSCI Inc (MSCI): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.