We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
A Simple 3-Step Process to Identify Winning Stocks
Read MoreHide Full Article
“Life is really simple, but men insist on making it complicated.” – Confucius
If we want to beat the market, we need to own stocks that are outperforming the market. This might sound overly simple, but there’s a lot of truth in that statement. There’s no reason to own stocks that are lagging or underperforming when we can own companies that can build our wealth at a greater pace.
There are hundreds of indicators available to help pick stocks. But in my experience, the more complicated a strategy is, the less likely it will work in the future.
A strategy that is easy to learn and has a history of profitability is much more likely to work in actual trading than an exceedingly complicated approach. The more complex an indicator is, the more difficult it is to use and the higher the probability that an error will occur. My motto in investing, as well as in life: simple is better.
The Zacks Rank
Here at Zacks we give you the tools to help identify leading stocks and outperform the market. Our Zacks Rank methodology pinpoints stocks that are witnessing positive earnings estimate revision activity, allowing investors to jump on board before an emerging rally gets underway. Our research has consistently shown that rising earnings estimates are the most powerful force impacting stock prices over time.
The Zacks Rank classifies stocks into five groups, ranging from “Strong Buy” to “Strong Sell”. More importantly, it allows individual investors to take advantage of trends in earnings estimate revisions, and benefit from the power of institutional investors.
Let’s begin our example with a Zacks Rank #1 (Strong Buy) stock. Vipshop Holdings (VIPS - Free Report) operates online platforms in China. Through Vip.com and other outlets, the company offers apparel, cosmetic products, shoes and handbags, luggage, sportswear, home furnishings, and more. VIPS also provides logistics, warehousing, and consulting services.
The Zacks Industry Rank
Our Zacks Industry Rank identifies the top industry groups that contain market leaders, providing a tailwind to our investing success. Quantitative research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
VIPS is part of the Zacks Internet – Delivery Services industry, which currently ranks in the top 5% out of approximately 250 industry groups. Because this group is ranked in the top 50% of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months.
By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
The Zacks Earnings ESP
And our Earnings ESP (Expected Surprise Prediction) filter empowers investors by allowing them the opportunity to detect stocks that are most likely to beat consensus estimates. The Zacks Earnings ESP seeks to identify companies that have recently witnessed positive earnings estimate revision activity. The technique has proven to be quite useful for finding positive 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.
A Zacks Rank #1 (Strong Buy), VIPS boasts a +3.9% Earnings ESP for the first quarter. Another earnings beat may be in the cards for Vipshop Holdings when the company reports these results in just a few weeks on May 18th.
These are just a select few of the benefits available to Zacks’ subscribers. Our Zacks Style Scores and Premium Screeners also assist investors in narrowing down the investable universe to only the top names. That’s the key – we only want to include the best of the best in our portfolio, which will allow us to maximize our investing potential.
Bottom Line
As investors we want to be in leading stocks. VIPS certainly fits the bill, as the stock has returned nearly 90% over the past year.
The Zacks Rank, Industry Rank, and Earnings ESP point to continued strength for Vipshop Holdings. Make sure to take advantage of these proprietary Zacks tools to uncover leading stocks like VIPS.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
A Simple 3-Step Process to Identify Winning Stocks
“Life is really simple, but men insist on making it complicated.” – Confucius
If we want to beat the market, we need to own stocks that are outperforming the market. This might sound overly simple, but there’s a lot of truth in that statement. There’s no reason to own stocks that are lagging or underperforming when we can own companies that can build our wealth at a greater pace.
There are hundreds of indicators available to help pick stocks. But in my experience, the more complicated a strategy is, the less likely it will work in the future.
A strategy that is easy to learn and has a history of profitability is much more likely to work in actual trading than an exceedingly complicated approach. The more complex an indicator is, the more difficult it is to use and the higher the probability that an error will occur. My motto in investing, as well as in life: simple is better.
The Zacks Rank
Here at Zacks we give you the tools to help identify leading stocks and outperform the market. Our Zacks Rank methodology pinpoints stocks that are witnessing positive earnings estimate revision activity, allowing investors to jump on board before an emerging rally gets underway. Our research has consistently shown that rising earnings estimates are the most powerful force impacting stock prices over time.
The Zacks Rank classifies stocks into five groups, ranging from “Strong Buy” to “Strong Sell”. More importantly, it allows individual investors to take advantage of trends in earnings estimate revisions, and benefit from the power of institutional investors.
Let’s begin our example with a Zacks Rank #1 (Strong Buy) stock. Vipshop Holdings (VIPS - Free Report) operates online platforms in China. Through Vip.com and other outlets, the company offers apparel, cosmetic products, shoes and handbags, luggage, sportswear, home furnishings, and more. VIPS also provides logistics, warehousing, and consulting services.
The Zacks Industry Rank
Our Zacks Industry Rank identifies the top industry groups that contain market leaders, providing a tailwind to our investing success. Quantitative research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
VIPS is part of the Zacks Internet – Delivery Services industry, which currently ranks in the top 5% out of approximately 250 industry groups. Because this group is ranked in the top 50% of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months.
By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
The Zacks Earnings ESP
And our Earnings ESP (Expected Surprise Prediction) filter empowers investors by allowing them the opportunity to detect stocks that are most likely to beat consensus estimates. The Zacks Earnings ESP seeks to identify companies that have recently witnessed positive earnings estimate revision activity. The technique has proven to be quite useful for finding positive 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.
A Zacks Rank #1 (Strong Buy), VIPS boasts a +3.9% Earnings ESP for the first quarter. Another earnings beat may be in the cards for Vipshop Holdings when the company reports these results in just a few weeks on May 18th.
These are just a select few of the benefits available to Zacks’ subscribers. Our Zacks Style Scores and Premium Screeners also assist investors in narrowing down the investable universe to only the top names. That’s the key – we only want to include the best of the best in our portfolio, which will allow us to maximize our investing potential.
Bottom Line
As investors we want to be in leading stocks. VIPS certainly fits the bill, as the stock has returned nearly 90% over the past year.
The Zacks Rank, Industry Rank, and Earnings ESP point to continued strength for Vipshop Holdings. Make sure to take advantage of these proprietary Zacks tools to uncover leading stocks like VIPS.