Taking full advantage of the stock market and investing with confidence are common goals for new and old investors, and Zacks Premium offers many different ways to do both.
The popular research service can help you become a smarter, more self-assured investor, giving you access to daily updates of the Zacks Rank and Zacks Industry Rank, the Zacks #1 Rank List, Equity Research reports, and Premium stock screens.
It also includes access to the Zacks Style Scores.
What are the Zacks Style Scores?
The Zacks Style Scores, developed alongside the Zacks Rank, are complementary indicators that rate stocks based on three widely-followed investing methodologies; they also help investors pick stocks with the best chances of beating the market over the next 30 days.
Each stock is given an alphabetic rating of A, B, C, D or F based on their value, growth, and momentum qualities. With this system, an A is better than a B, a B is better than a C, and so on, meaning the better the score, the better chance the stock will outperform.
The Style Scores are broken down into four categories:
Value investors love finding good stocks at good prices, especially before the broader market catches on to a stock's true value. Utilizing ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and many other multiples, the Value Style Score identifies the most attractive and most discounted stocks.
Growth investors, on the other hand, are more concerned with a company's financial strength and health, and its future outlook. The Growth Style Score examines things like projected and historic earnings, sales, and cash flow to find stocks that will experience sustainable growth over time.
Momentum investors, who live by the saying "the trend is your friend," are most interested in taking advantage of upward or downward trends in a stock's price or earnings outlook. Utilizing one-week price change and the monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.
If you want a combination of all three Style Scores, then the VGM Score will be your friend. It rates each stock on their combined weighted styles, helping you find the companies with the most attractive value, best growth forecast, and most promising momentum. It's also one of the best indicators to use with the Zacks Rank.
How Style Scores Work with the Zacks Rank
A proprietary stock-rating model, the Zacks Rank utilizes the power of earnings estimate revisions, or changes to a company's earnings outlook, to help investors create a successful portfolio.
It's highly successful, with #1 (Strong Buy) stocks producing an unmatched +25.41% average annual return since 1988. That's more than double the S&P 500. But because of the large number of stocks we rate, there are over 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day.
This totals more than 800 top-rated stocks, and it can be overwhelming to try and pick the best stocks for you and your portfolio.
That's where the Style Scores come in.
You want to make sure you're buying stocks with the highest likelihood of success, and to do that, you'll need to pick stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B. If you like a stock that only as a #3 (Hold) rank, it should also have Scores of A or B to guarantee as much upside potential as possible.
As mentioned above, the Scores are designed to work with the Zacks Rank, so any change to a company's earnings outlook should be a deciding factor when picking which stocks to buy.
Here's an example: a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one with Style Scores of A and B, still has a downward-trending earnings outlook, and a bigger chance its share price will decrease too.
Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.
Stock to Watch: Carrier Global ( CARR Quick Quote CARR - Free Report)
Palm Beach Gardens, FL-based Carrier Global is a provider of advanced heating, ventilation, refrigeration, air conditioning, fire, security and building automation technologies. The company completed its Initial Public Offering (“IPO”) in April 2020.
CARR is a #3 (Hold) on the Zacks Rank, with a VGM Score of A.
Momentum investors should take note of this Computer and Technology stock. CARR has a Momentum Style Score of B, and shares are up 4% over the past four weeks.
Eight analysts revised their earnings estimate upwards in the last 60 days for fiscal 2023. The Zacks Consensus Estimate has increased $0.09 to $2.72 per share. CARR boasts an average earnings surprise of 6%.
With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, CARR should be on investors' short list.