Back to top

Anatomy of Success

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

They say 'luck' is simply about being prepared for an opportunity.

In the stock market, when a positive earnings surprise sends a stock exploding higher, those that were properly positioned are often called lucky for being in.

To a degree, they are right. How much a stock moves after such an event depends on a lot of things.

But purposefully being in a stock with a high probability of positively surprising is a lot more science that luck. And much of it comes down to their ability to surprise in the past along with their earnings estimate revisions.


Green Mountain Coffee Roasters (GMCR - Analyst Report)

Those in Green Mountain Coffee, a specialty coffee maker, were setting themselves up to get very 'lucky'.

On November 30th, 2012, GMCR was upgraded to a Zacks Rank #1 (Strong Buy), which forecast that they would outperform the market over the next 1-3 months. At that time, they were trading at $36.67 with their projected 12 Month Earnings Estimates at $2.73.

Investors who got in on that Strong Buy signal saw the price of GMCR start to climb immediately. And week by week, their earnings estimate revisions steadily climbed as well. Each increase in earnings estimates provided more and more reason for the stock to continue its uptrend.

On Feb. 6th, 2013, GMCR posted a positive surprise of 15.38%. Prices didn't immediately explode higher after that beat, but with estimates continuing to go up, prices quickly followed suit, gaining another 28% between then and their next earnings report.

Leading up to that report, investors were quite confident that even better things were in store for GMCR. With earnings estimates still on the rise, and knowing that companies that positively surprise have a greater tendency to surprise again, it's no wonder investors were excited.

On May 8th, that excitement was well founded as they posted another positive surprise, this time 27.40%, and prices skyrocketed 27.84% in one day. All in all, between 11/30/12, when they first earned their Zacks #1 Rank, and the close of business on 5/17/13 (6 ½ months later and still a Zacks Rank #1), GMCR increased by 117.10%. Wow!



Stocks receiving upward earnings estimate revisions typically receive even more upward earnings estimate revisions. And stocks receiving upward earnings estimate revisions have a higher probability of positively surprising. This virtuous cycle continues as stocks that positively surprise have a tendency of positively surprising again.

Very few things can send a price skyrocketing like a positive EPS surprise. But you don't have to wait to get lucky on one of these stocks. You can create your own luck by keying in on stocks with a Zacks Rank #1, upward earnings estimate revisions, and a recent history of positive EPS surprises.

Click here to see more Zacks Rank #1 stocks

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
VERTEX ENERG VTNR 8.25 +10.59%
MODINE MANUF MOD 17.12 +8.77%
CLAYTON WILL CWEI 140.03 +7.27%
E*TRADE FINA ETFC 22.67 +5.44%
KNIGHTSBRIDG VLCCF 13.22 +5.42%