(0:30) - Finding Strong Investments For Your Portfolio Right Now (5:00) - How The Zacks Rank Can Help You During A Bear Market (8:10) - Tracey’s Top Stocks (28:30) - The Big Takeaways From The Zacks Ranking System (33:00) - Episode Roundup: OXM, LULU, ALB, LTHM, CHK Podcast@Zacks.com
Welcome to Episode #330 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey went solo to discuss how investors should get strategic even as the bear market churns on.
Instead of joining the bear market brigade, why not focus on where things are still bullish? Where are analysts actually raising earnings estimates, instead of cutting?
Now is the time to use the Zacks Rank to your advantage. It can be a great tool for uncovering hidden stock gems.
What’s the Zacks Rank?
The Zacks Rank is system that ranks over 4400 companies based on changes to analyst earnings estimates. The Zacks Rank of #1 (Strong Buy) is the highest, and best, rank. The Zacks Rank of #5 (Strong Sell), is the worst rank.
It is a computer algorithm that can change daily.
But rising earnings estimates, especially in these type of bearish market conditions when earnings guidance is being cut more than raised, can indicate that there is something special going on at a company.
How Hard is it To Make the List?
The Textile-Apparel industry has 19 companies including some of the biggest names in retail. But this industry has lagged as business has slowed due to inflationary pressures. After all, do you really need to buy that new top or pants when you are paying $100 to fill up the gas tank?
Out of that group of 19 companies, however, there is just one that is currently a Zacks Rank #1 (Strong Buy). And it’s not who you think it is.
1. Lululemon ( LULU Quick Quote LULU - Free Report)
Lululemon is one of the strongest brands in retail. Not even the pandemic seemed to slow them down as consumers still wanted their yoga pants.
Lululemon is expected to grow earnings by 26.7% this year, even with China’s economy facing disruptions due to the Zero COVID policy and a slowing economy. Analysts believe Lululemon will grow earnings another 16% next year.
But even with big earnings growth expected, Lululemon is still just a Zacks Rank #2 (Buy). It’s not the company with the #1 Rank in apparel.
2. Oxford Industries ( OXM Quick Quote OXM - Free Report)
Oxford Industries, which owns Tommy Bahama and Lilly Pulitzer, is the only company currently taking the top prize in the apparel industry.
On Sep 19, Oxford announced it was acquiring Johnny Was, a California boho vintage retail chain with 61 stores in 24 states. Oxford Industries expects it to be immediately accretive so it raised full year earnings guidance.
But Oxford also said that two-thirds of the raise was Johnny Was, but one-third was strong quarter-to-date performance. It’s brands continue to resonate with consumers.
As a result, analysts raised their earnings estimates to meet the new guidance. Earnings are expected to rise 31% this year. Oxford Industries is cheap, with a forward P/E of 8.5.
The Zacks Rank uncovered a “story” with Oxford Industries that you might not have discovered otherwise.
The Zacks Rank can be a powerful tool during bear markets. It can uncover hidden gems.
3 Zacks #1 Rank Stocks 1. Albemarle ( ALB Quick Quote ALB - Free Report)
The lithium producers are some of the few companies that have been raising guidance this year as lithium prices have tripled over the last year. Albemarle’s earnings are expected to rise 425% this year to $21.22 from $4.04 last year.
Shares of Albemarle are up 14% year-to-date, bucking the negative market trend.
Albemarle is cheap with a forward P/E of 12.5.
Is it too late to buy Albemarle?
2. Livent ( LTHM Quick Quote LTHM - Free Report)
Livent describes itself as a lithium tech company. It’s stock is sure acting like a tech stock, as shares are up 26.3% year-to-date.
Livent’s earnings are expected to jump 666% to $1.38 from $0.18 last year.
It trades with a forward P/E of 21.9.
Should Livent investors wait on the sidelines for a pull back or dive in?
3. Chesapeake Energy ( CHK Quick Quote CHK - Free Report)
Chesapeake Energy is an energy exploration and production company. The explorers are in the top 13% of industries as earnings are surging due to high oil and natural gas prices.
Shares of Chesapeake Energy are up 42% year-to-date but are still dirt cheap, with a forward P/E of just 5.2.
Earnings are expected to soar another 46% next year.
Chesapeake Energy also pays a dividend, and recently raised its base dividend by 10% to $2.20 per share. That’s a yield of 2.4%. But it also has paid out special dividends this year which makes the yield even higher.
Should this Zacks Rank #1 (Strong Buy) be on your short list?
What Else Should You Know About the Zacks Rank?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns shares of LULU in her personal portfolio.]