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How to Select Stocks During Volatile Market Periods
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The price action yesterday was swift as the Nasdaq closed down nearly 3%, tumbling below its 50-day moving average and threatening nearby support levels. It remains to be seen if this is the start of a larger down move comparable to late 2018 (which was the last time the Fed had its hand on the rate hike button), or if this is more muted volatility similar to what we saw throughout last year.
During times of heightened market volatility, it’s important to take note of which sectors, industry groups and individual stocks are bucking the trend and outperforming the general market. Stocks that are able to weather the turbulence provide a signal that institutions are buying the stock and sellers are few and far between. Take note of which sectors held up best amid yesterday’s downturn:
Image Source: Zacks Investment Research
Stocks that hold up well when the market is falling tend to lead the next leg up and continue their outperformance. We want to target stocks in uptrends that are in leading industry groups. Another piece of evidence we can rely on when it comes to selecting profitable opportunities is if the stock is making a series of new 52-week highs. Only stocks that are in the most powerful uptrends consistently make this list.
We are going to examine two healthcare stocks that held up well yesterday and closed in the green while the market plummeted. These stocks are making a series of new 52-week highs and are trending well. Both are part of the Zacks Large Cap Pharmaceutical industry group, which is ranked in the top 37% of all 254 industry groups.
We expect this industry group to outperform over the next 3-6 months. Quantitative research studies have shown that approximately half of a stock’s future price appreciation is due to its industry grouping. By focusing on leading stocks within the top Zacks Ranked Industries, you can dramatically improve your stock-picking success.
AbbVie is a research-based biopharmaceutical company that develops, manufactures and sells various pharmaceuticals globally. Its treatments target diseases such as autoimmune and intestinal, severe plaque psoriasis, rheumatoid arthritis, Parkinson’s, and advanced prostate cancer. AbbVie was incorporated in 2012 and is headquartered in North Chicago, IL.
A Zacks #2 Buy stock, ABBV has become one of the top pharmaceutical companies after it acquired Botox maker Allergan in a deal worth $63 billion in May 2020. The company has built a promising pipeline of successful new drugs, and key FDA approvals over the last few years indicate sales can continue to exceed estimates in the near future. ABBV revenues are expected to have increased 22.86% in 2021 to $56.28 billion.
Image Source: Zacks Investment Research
AbbVie has surpassed earnings estimates in each of the last eleven quarters and trades at very reasonable 9.6 forward P/E. The company has posted an average earnings surprise of +3.02% over the last four quarters, helping ABBV stock advance nearly 34% in the past year.
AbbVie Inc. Price, Consensus and EPS Surprise
The Zacks Consensus Estimate for 2021 EPS stands at $12.69, which would represent a 20.17% increase relative to 2020. For 2022, analysts are expecting an 11.03% increase in EPS to $14.09. ABBV is scheduled for its final ’21 quarterly earnings report on February 2nd.
Pfizer is a global pharmaceutical company that discovers, manufactures and markets medicines for humans and animals. PFE’s diversified portfolio includes biologic and small molecule medicines, vaccines, and nutritional healthcare products. Pfizer is also involved in the contract manufacturing business, serving wholesalers, retailers, hospitals, clinics, governments, and pharmacies. PFE was founded in 1849 and is based in New York, NY.
In 2020, PFE’s Vaccine segment accounted for 15.7% of total revenues. Pfizer and partner BioNTech’s COVID-19 vaccine is now approved for emergency use in many countries and is fully approved in the United States. The duo has already shipped 2 billion doses to 152 countries and are expected to have manufactured 3 billion doses as of last month. In addition, Pfizer’s oral antiviral pill for COVID-19 was approved last month and will further increase revenues this year.
PFE is relatively undervalued, trading at a 9.91 forward P/E. The company has exceeded earnings estimates in six of the past seven quarters, most recently posting EPS this past November of $1.34 – a +24.07% surprise over consensus. PFE has delivered a trailing four-quarter average earnings surprise of 10.85%, supporting the stock’s climb of 55.4% over the past year.
Pfizer Inc. Price, Consensus and EPS Surprise
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to identify companies that have recently seen positive earnings estimate revision activity. The technique has proven to be quite useful for finding positive earnings surprises. In fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
PFE is a Zacks #1 Strong Buy stock and has a positive Earnings ESP of 6.24%. The recent trend of earnings beats looks set to continue.
Analysts are expecting full-year earnings of $4.21 when PFE submits its final ’21 quarterly report on February 8th. This would translate to roughly 90% growth over 2020 EPS. Delving into 2022, analysts have increased their EPS estimates by 43.23% in the past 60 days. 2022 EPS estimates now sit at $5.50, which would represent growth of 30.68% compared to last year.
Keep an eye on these two pharmaceutical companies in 2022.
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How to Select Stocks During Volatile Market Periods
The price action yesterday was swift as the Nasdaq closed down nearly 3%, tumbling below its 50-day moving average and threatening nearby support levels. It remains to be seen if this is the start of a larger down move comparable to late 2018 (which was the last time the Fed had its hand on the rate hike button), or if this is more muted volatility similar to what we saw throughout last year.
During times of heightened market volatility, it’s important to take note of which sectors, industry groups and individual stocks are bucking the trend and outperforming the general market. Stocks that are able to weather the turbulence provide a signal that institutions are buying the stock and sellers are few and far between. Take note of which sectors held up best amid yesterday’s downturn:
Stocks that hold up well when the market is falling tend to lead the next leg up and continue their outperformance. We want to target stocks in uptrends that are in leading industry groups. Another piece of evidence we can rely on when it comes to selecting profitable opportunities is if the stock is making a series of new 52-week highs. Only stocks that are in the most powerful uptrends consistently make this list.
We are going to examine two healthcare stocks that held up well yesterday and closed in the green while the market plummeted. These stocks are making a series of new 52-week highs and are trending well. Both are part of the Zacks Large Cap Pharmaceutical industry group, which is ranked in the top 37% of all 254 industry groups.
We expect this industry group to outperform over the next 3-6 months. Quantitative research studies have shown that approximately half of a stock’s future price appreciation is due to its industry grouping. By focusing on leading stocks within the top Zacks Ranked Industries, you can dramatically improve your stock-picking success.
AbbVie, Inc. (ABBV - Free Report)
AbbVie is a research-based biopharmaceutical company that develops, manufactures and sells various pharmaceuticals globally. Its treatments target diseases such as autoimmune and intestinal, severe plaque psoriasis, rheumatoid arthritis, Parkinson’s, and advanced prostate cancer. AbbVie was incorporated in 2012 and is headquartered in North Chicago, IL.
A Zacks #2 Buy stock, ABBV has become one of the top pharmaceutical companies after it acquired Botox maker Allergan in a deal worth $63 billion in May 2020. The company has built a promising pipeline of successful new drugs, and key FDA approvals over the last few years indicate sales can continue to exceed estimates in the near future. ABBV revenues are expected to have increased 22.86% in 2021 to $56.28 billion.
AbbVie has surpassed earnings estimates in each of the last eleven quarters and trades at very reasonable 9.6 forward P/E. The company has posted an average earnings surprise of +3.02% over the last four quarters, helping ABBV stock advance nearly 34% in the past year.
AbbVie Inc. Price, Consensus and EPS Surprise
The Zacks Consensus Estimate for 2021 EPS stands at $12.69, which would represent a 20.17% increase relative to 2020. For 2022, analysts are expecting an 11.03% increase in EPS to $14.09. ABBV is scheduled for its final ’21 quarterly earnings report on February 2nd.
Pfizer Inc. (PFE - Free Report)
Pfizer is a global pharmaceutical company that discovers, manufactures and markets medicines for humans and animals. PFE’s diversified portfolio includes biologic and small molecule medicines, vaccines, and nutritional healthcare products. Pfizer is also involved in the contract manufacturing business, serving wholesalers, retailers, hospitals, clinics, governments, and pharmacies. PFE was founded in 1849 and is based in New York, NY.
In 2020, PFE’s Vaccine segment accounted for 15.7% of total revenues. Pfizer and partner BioNTech’s COVID-19 vaccine is now approved for emergency use in many countries and is fully approved in the United States. The duo has already shipped 2 billion doses to 152 countries and are expected to have manufactured 3 billion doses as of last month. In addition, Pfizer’s oral antiviral pill for COVID-19 was approved last month and will further increase revenues this year.
PFE is relatively undervalued, trading at a 9.91 forward P/E. The company has exceeded earnings estimates in six of the past seven quarters, most recently posting EPS this past November of $1.34 – a +24.07% surprise over consensus. PFE has delivered a trailing four-quarter average earnings surprise of 10.85%, supporting the stock’s climb of 55.4% over the past year.
Pfizer Inc. Price, Consensus and EPS Surprise
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to identify companies that have recently seen positive earnings estimate revision activity. The technique has proven to be quite useful for finding positive earnings surprises. In fact, when combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
PFE is a Zacks #1 Strong Buy stock and has a positive Earnings ESP of 6.24%. The recent trend of earnings beats looks set to continue.
Analysts are expecting full-year earnings of $4.21 when PFE submits its final ’21 quarterly report on February 8th. This would translate to roughly 90% growth over 2020 EPS. Delving into 2022, analysts have increased their EPS estimates by 43.23% in the past 60 days. 2022 EPS estimates now sit at $5.50, which would represent growth of 30.68% compared to last year.
Keep an eye on these two pharmaceutical companies in 2022.