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Cabela's and 4 Other Value Gems to Watch in the Retail Sector
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“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett
The strategy is quite simple – find stocks that are trading below their inherent worth. An investment decision based on the intrinsic value of stocks seems feasible in the given economic scenario. But before jumping to the strategy, let’s take a sneak peek at the economy.
How the Economy is Unfolding
Global economic headwinds such as yet-to-recover Chinese economy, fears of a Brexit and fluctuating commodity prices are leaving investors perplexed about which stocks to bank on. The U.S. stock market also displayed a sluggish performance at the start of the year owing to fears of overseas turmoil and plunging oil prices. Although the market has recouped much of the losses, it is yet to breathe a sigh of relief.
The recent rebound in oil prices following a decline in crude inventories, a sharp increase in consumer spending in almost seven years in April, and a gradual improvement in the housing market are signals that the economy is on a recovery mode. However, a dip in consumer confidence as evident from the recent May reading and an anemic job report unveiling that the economy added a total of only 38,000 jobs last month, the lowest in over five years, cast a doubt over the health of the economy.
The economic indicators are making things complicated for the Federal Reserve to go for a rate hike. Well, the Federal Reserve is surely keeping a close watch on the ongoing economic activities and will arrive at a decision only after taking into account all the relevant factors.
Thus, it is quite apparent that you can’t control a situation beyond your reach. So for now, how about being a wise investor and striking the right chord?
What’s the Optimum Strategy?
Investment in stocks based on a diligent value analysis is usually considered one of the best practices. In value investing, investors pick stocks that are cheap but fundamentally sound. So the chance of these stocks allowing investors to book profits is high when the market trends upward. Thus, for long-term investors, a look at the intrinsic value of a stock is always warranted. So what are the criteria to identify value stocks?
A value stock may have a high dividend yield, low price-to-book ratio, low price-to-earnings ratio or a low price-to-sales ratio. However, it might be difficult for one to look at each parameter and compare with the peer group for an analysis on whether the stock is attractive from the value perspective. To make the task easy, Zacks has designed the new Style Score System.
The attractiveness of a stock as an investment option is confirmed by its Value Style Score of “A” or “B”. Our research shows that stocks with Style Scores of “A” or “B” when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best upside potential.
Cabela's Incorporated is one such stock that carries a Zacks Rank #2 with a Value Style Score of “A”. This leading specialty retailer and direct marketer of hunting, fishing, camping, and related outdoor merchandise has a long term earnings growth rate of 12.7%. The company has also been witnessing solid earnings estimate revisions over the past 60 days.
4 Other Value Gems
We suggest investing in BJ's Restaurants, Inc. (BJRI - Free Report) , operator of casual dining restaurants, with a Value Score of “A” and a Zacks Rank #2. The stock with a long-term earnings growth rate of 17.9% has been enjoying positive estimate revisions over the past 60 days.
Burlington Stores, Inc. (BURL - Free Report) , with a Zacks Rank #2 and a long-term earnings growth rate of 17.7%, is another solid bet. This retailer of branded apparel products has a Value Score of “A”. The Zacks Consensus Estimate too has trended upward over the past 30 days.
You can also count on Lowe's Companies, Inc. (LOW - Free Report) , a home improvement retailer, carrying a Zacks Rank #2 and a Value Score of “A”. The stock has been witnessing positive estimate revisions over the past 30 days and has a long-term earnings growth rate of 15.6%.
Last but not least is Wal-Mart Stores Inc. (WMT - Free Report) , with a Zacks Rank #2 and a Value Score of “A”. This operator of a chain of hypermarkets, discount department stores and grocery stores has a long-term earnings growth rate of 3.5%. The Zacks Consensus Estimate too has been portraying an uptrend over the past 30 days.
Bottom Line
Investors can confidently end their search at stocks with a better Zacks Rank status of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. A sturdy portfolio always gives favorable returns.
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Cabela's and 4 Other Value Gems to Watch in the Retail Sector
“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett
The strategy is quite simple – find stocks that are trading below their inherent worth. An investment decision based on the intrinsic value of stocks seems feasible in the given economic scenario. But before jumping to the strategy, let’s take a sneak peek at the economy.
How the Economy is Unfolding
Global economic headwinds such as yet-to-recover Chinese economy, fears of a Brexit and fluctuating commodity prices are leaving investors perplexed about which stocks to bank on. The U.S. stock market also displayed a sluggish performance at the start of the year owing to fears of overseas turmoil and plunging oil prices. Although the market has recouped much of the losses, it is yet to breathe a sigh of relief.
The recent rebound in oil prices following a decline in crude inventories, a sharp increase in consumer spending in almost seven years in April, and a gradual improvement in the housing market are signals that the economy is on a recovery mode. However, a dip in consumer confidence as evident from the recent May reading and an anemic job report unveiling that the economy added a total of only 38,000 jobs last month, the lowest in over five years, cast a doubt over the health of the economy.
The economic indicators are making things complicated for the Federal Reserve to go for a rate hike. Well, the Federal Reserve is surely keeping a close watch on the ongoing economic activities and will arrive at a decision only after taking into account all the relevant factors.
Thus, it is quite apparent that you can’t control a situation beyond your reach. So for now, how about being a wise investor and striking the right chord?
What’s the Optimum Strategy?
Investment in stocks based on a diligent value analysis is usually considered one of the best practices. In value investing, investors pick stocks that are cheap but fundamentally sound. So the chance of these stocks allowing investors to book profits is high when the market trends upward. Thus, for long-term investors, a look at the intrinsic value of a stock is always warranted. So what are the criteria to identify value stocks?
A value stock may have a high dividend yield, low price-to-book ratio, low price-to-earnings ratio or a low price-to-sales ratio. However, it might be difficult for one to look at each parameter and compare with the peer group for an analysis on whether the stock is attractive from the value perspective. To make the task easy, Zacks has designed the new Style Score System.
The attractiveness of a stock as an investment option is confirmed by its Value Style Score of “A” or “B”. Our research shows that stocks with Style Scores of “A” or “B” when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best upside potential.
Cabela's Incorporated is one such stock that carries a Zacks Rank #2 with a Value Style Score of “A”. This leading specialty retailer and direct marketer of hunting, fishing, camping, and related outdoor merchandise has a long term earnings growth rate of 12.7%. The company has also been witnessing solid earnings estimate revisions over the past 60 days.
4 Other Value Gems
We suggest investing in BJ's Restaurants, Inc. (BJRI - Free Report) , operator of casual dining restaurants, with a Value Score of “A” and a Zacks Rank #2. The stock with a long-term earnings growth rate of 17.9% has been enjoying positive estimate revisions over the past 60 days.
Burlington Stores, Inc. (BURL - Free Report) , with a Zacks Rank #2 and a long-term earnings growth rate of 17.7%, is another solid bet. This retailer of branded apparel products has a Value Score of “A”. The Zacks Consensus Estimate too has trended upward over the past 30 days.
You can also count on Lowe's Companies, Inc. (LOW - Free Report) , a home improvement retailer, carrying a Zacks Rank #2 and a Value Score of “A”. The stock has been witnessing positive estimate revisions over the past 30 days and has a long-term earnings growth rate of 15.6%.
Last but not least is Wal-Mart Stores Inc. (WMT - Free Report) , with a Zacks Rank #2 and a Value Score of “A”. This operator of a chain of hypermarkets, discount department stores and grocery stores has a long-term earnings growth rate of 3.5%. The Zacks Consensus Estimate too has been portraying an uptrend over the past 30 days.
Bottom Line
Investors can confidently end their search at stocks with a better Zacks Rank status of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. A sturdy portfolio always gives favorable returns.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>