There are few things as satisfying to an investor as getting into a stock and seeing it turn into a wonderful uptrend. But if you didnt get in at the beginning, and are looking for a place to do so, there are few things as difficult as deciding when and where to hop in on an existing trend in hopes of seeing it go up even more.
But a quick glance at the stocks earnings estimate revisions and Zacks Rank can provide a clear signal when its opportune to get in with a high probability of success.
PetSmart, Inc. (PETM)
PetSmart is a large-cap growth stock in the Retail Industry. They are one of the largest pet supply stores in the United States. If you have a pet, you've likely been in one of their stores at some point in time.
But you don't have to be a pet owner to love this stock. It's been in a solid uptrend for several years, returning several hundred percent.
If someone was looking for a place to get in on this uptrend, they would have gotten their signal on October 21, 2011, as PETM once again received the coveted Zacks Rank #1 (Strong Buy), suggesting it would outperform the market over the next 1-3 months. At that time, it was trading at $47.41 with a 12 Month Forward Earnings Estimate of $2.79.
But this winner turned into something even bigger. For the next 10 months, its earnings estimates were continuously on the rise, going from $2.79 to $3.63, while its Zacks Rank successfully predicted four positive EPS Surprises, culminating in a 49.58% return, compared to the market's 13.59% over that same time period.
The Zacks Rank is ideal for finding stocks ready to outperform over the next 1-3 months. But many short-term outperformers, not surprisingly, turn into longer-term outperformers, giving investors an opportunity to beat the market over and over again. This makes sense as companies receiving upward earnings estimate revisions have a greater tendency of receiving even more upward earnings estimate revisions. This typically leads to positive EPS surprises, which in turn leads to more upward earnings estimate revisions, with higher stock prices to follow.
It's a virtuous cycle that happily repeats itself over and over again. These types of set-ups are happening all the time, and all around you. You just need to know where to look. But you need to look no further than the Zacks #1 Rank.
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Disclosure: Performance information for Zacks portfolios and strategies are available at: http://www.zacks.com/performance.