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Take the Zacks Approach to Beat the Market: Carrols, Nextracker, Costco in Focus

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Last Friday, the three widely followed indexes closed a week of gains. The S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average rose 1.7%, 1.4% and 1.3%, respectively.

Throughout the week, stock trading was dominated by expectations from and, finally, jubilation at NVIDIA Corporation’s (NVDA) fourth-quarter earnings report. Big tech got a massive boost, with the report reaffirming the notion that Nvidia’s meteoric 2023 rise on AI optimism was actually based on good fundamentals and the company is not overvalued. This helped the week’s trade overcome the apprehension of “higher for longer” rate expectations from the Fed and a sustained inflationary environment.

Investors will be keenly watching the Fed’s favorite inflation metric, the PCE report, slated to be released this week to get a better hang of things.

Regardless of market conditions, we, here at Zacks, provide investors with unbiased guidance on how to beat the market. 

As usual, Zacks Research guided investors over the past three months with its time-tested methodologies. Given the prevailing market uncertainty, you may want to look at our feats to prepare better for your next action.

Here are some of our key achievements:

Carrols Restaurant and WisdomTree Surge Following Zacks Rank Upgrade

Shares of Carrols Restaurant Group, Inc. (TAST - Free Report) have gained 27.4% (versus the S&P 500’s 6.7% increase) since it was upgraded to a Zacks Rank #1 (Strong Buy) on December 25.

Another stock, WisdomTree, Inc. (WT - Free Report) , which was upgraded to a Zacks Rank #2 (Buy) on December 29, has returned 7.2% (versus the S&P 500’s 6.2% increase) since then.

Zacks Rank, our short-term rating system, has earnings estimate revisions at its core. Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. 

A hypothetical portfolio of Zacks Rank #1 (Strong Buy) stocks returned +20.63% in 2023 vs. +24.83% for the S&P 500 index and +15% for the equal-weight S&P 500 index. The portfolio of Zacks Rank #1 stocks is an equal-weight portfolio, while the S&P 500 index is a market-cap-weighted index that has been notably distorted by the concentrated performance of mega-cap stocks in 2023.

We are not trying to cherry-pick here. But since this Zacks Model portfolio, consisting of Zacks Rank #1 stocks, is an equal-weight portfolio, the equal-weight S&P 500 index is the appropriate benchmark for comparison. Looked at this way, this portfolio has handily outperformed the index.

The Zacks Model Portfolio - consisting of Zacks Rank #1 stocks – has outperformed the S&P index by more than 13 percentage points since 1988 (Through January 1st, 2024, the Zacks # 1 Rank stocks generated an annualized return of +24.18% since 1988 vs. +10.88% for the S&P 500 index). You can see the complete list of today’s Zacks Rank #1 stocks here >>>

Check Carrols’ historical EPS and Sales here>>>

Check WisdomTree’s historical EPS and Sales here>>>

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Zacks Recommendation Upgrades Nextracker and H World Group Higher 

Shares of Nextracker Inc. (NXT - Free Report) and H World Group Limited (HTHT - Free Report) have advanced 21% (versus the S&P 500’s 7.8% rise) and 18% (versus the S&P 500’s 8% rise) since their Zacks Recommendation was upgraded to Outperform on December 18 and December 21, respectively.

While the Zacks Rank is our short-term rating system that is most effective over the one- to three-month holding horizon, the Zacks Recommendation aims to predict performance over the next 6 to 12 months. However, just like the Zacks Rank, the foundation for the Zacks Recommendation is trends in earnings estimate revisions.

The Zacks Recommendation classifies stocks into three groups — Outperform, Neutral and Underperform. While these recommendations are determined quantitatively, our analysts have the flexibility to override them for the 1100+ stocks they closely follow based on their better judgment of factors such as valuation, industry conditions and management effectiveness than the quantitative model.

To access our research reports with Zacks Recommendations for the 1100+ stocks we cover, click here>>>

Zacks Focus List Stocks Lam Research, GE HealthCare Shoot Up

Shares of Lam Research Corporation (LRCX - Free Report) , which belongs to the Zacks Focus List, have gained 28.6% over the past 12 weeks. The stock was added to the Focus List on December 5, 2016. Another Focus-List holding, GE HealthCare Technologies Inc. (GEHC - Free Report) , which was added to the portfolio on January 4, 2023, has returned 28.3% over the past 12 weeks. The S&P 500 has advanced 10.6% over this period. 

The 50-stock Zacks Focus List model portfolio returned +21.72% in 2023 (through November 30) vs. +20.79% for the S&P 500 index and +6.32% for the equal-weight S&P 500 index. In 2022, the portfolio produced -15.2% vs. the S&P 500 index’s -17.96%.

Since 2004, the Focus List portfolio has produced an annualized return of +11.07% through November 30, 2023. This compares to a +9.49% annualized return for the S&P 500 index in the same time period.

On a rolling one-, three- and five-year annualized basis, the Zacks Focus List returned +13.49%, +9.21%, and +14.05% vs. +13.82%, +9.74% and +12.51% for the S&P 500 index, respectively.

Unlock all of our powerful research, tools and analysis, including the Focus List, Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more, as part of Zacks Premium. Gain full access now >>

Zacks ECAP Stocks Costco Wholesale and Novo Nordisk Make Significant Gains

Costco Wholesale Corporation (COST - Free Report) , a component of our Earnings Certain Admiral Portfolio (ECAP), has jumped 23.8% over the past 12 weeks. Novo Nordisk A/S (NVO - Free Report) has followed Costco with 23% returns.

The Zacks Earnings Certain Admiral Portfolio (ECAP), which consists of 30 concentrated, ultra-defensive, long-term Buy and Hold stocks, returned +12.17% in 2023 vs. +26.28% for the S&P 500 index. The portfolio returned -4.7% in 2022 vs. the S&P 500 index’s -17.96%.

With little to no turnover and annual rebalance periodicity, the ECAP seeks to minimize capital loss by holding shares of companies whose earnings streams exhibit a proven 20+ year track record of surviving recessionary periods with minimal impact on aggregate earnings growth relative to the overall S&P 500.

The ECAP and many other model portfolios are available as part of Zacks Advisor Tools, a cloud-based solution to access Zacks award-winning stock, mutual fund and ETF research. Click here to schedule a demo.

Zacks ECDP Stocks Intercontinental Exchange and Home Depot Outshine Peers

Intercontinental Exchange, Inc. (ICE - Free Report) , which is part of our Earnings Certain Dividend Portfolio (ECDP), has returned 21.1% over the past 12 weeks. Another ECDP stock, The Home Depot, Inc. (HD - Free Report) , has climbed 16.4% over the same time frame. Of course, the inclination of investors toward quality dividend stocks to secure an income stream amid heightened market volatility contributed to this performance.

Check Intercontinental Exchange’s dividend history here>>>

Check Home Depot’s dividend history here>>>

With an extremely low Beta and a history of minimum earnings variability over the last 20+ years, this 25-stock portfolio helps significantly mitigate risk.

The Zacks Earnings Certain Dividend Portfolio (ECDP) returned -0.9% in 2023 vs. +26.28% for the S&P 500 index) and +8.11% for the Dividend Aristocrats ETF (NOBL). The portfolio returned -2.3% in 2022 vs. -17.96% for the S&P 500 index and -8.34% for NOBL.

Click here to access this portfolio on Zacks Advisor Tools

Zacks Top 10 Stocks — Sprouts Farmers Market Delivers Solid Returns

Sprouts Farmers Market, Inc. (SFM - Free Report) , from the Zacks Top 10 Stocks for 2024, has jumped 23.9% year to date compared to a 6.9% increase for the S&P 500 Index.

The Top 10 portfolio returned +25.15% in 2023 vs. +26.28% for the S&P 500 index. Since 2012, the Top 10 portfolio has produced a cumulative return of +1060.9% through the end of 2023 vs. +360.1% for the S&P 500 index.

On a rolling one-, three- and five-year annualized basis, the Zacks Top 10 portfolio returned +25.15%, +14.13%, and +29.3% vs. +26.28%, +10.23% and +15.61% for the S&P 500 index, respectively.

Since 2012, the Zacks Top 10 portfolio has returned an annualized return of +22.67% through the end of 2023 vs. +13.56% for the S&P 500 index.

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