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Filling Top-Ranked Stocks in NCAA "Sweet 16" Brackets
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The National Collegiate Athletic Association (NCAA) Division I Men's Basketball Tournament, popularly known as March Madness, kicked off last week and is expected to continue for two more weeks. The champion will be crowned on Apr 8 at the State Farm Stadium in Glendale, AZ. The tournament works its way up from 64 college teams to “Sweet Sixteen,” to be played on Mar 28, followed by “Elite Eight,” “Final Four,” and ultimately, the championship.
The extravaganza is not limited to the sports space but spreads to the investment world as it fuels growth in various corners such as media, advertising, restaurants, hotels and airlines. Millions of Americans seek to capitalize on this opportunity by enthusiastically filling in the brackets that could lead to handsome returns from the stocks to be wagered on.
Since the tournament has reached Sweet Sixteen, let’s start filling the brackets from this level and then compare those as we do for March Madness to get to the real winner.
Here’s How to Pick the Sweet 16 Stocks
Akin to the basketball championship, we have chosen four sectors – construction, computer and technology, retail and industrial products – out of the 16 Zacks sectors that have outperformed over the past year. We have picked the four best industries (within the top 45%) from each sector with the help of the Zacks Industry Rank.
Then, we picked one stock from each industry having a Zacks Rank #1 (Strong Buy) or 2 (Buy) with the highest market capitalization in order to get the Sweet 16 stocks. Top-ranked stocks indicate rising earnings estimates and those with strong earnings momentum are more likely to outpace the market. This was a cakewalk, courtesy of the Zacks Stock Screener. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Once the stocks were chosen, one-year performance was considered for the qualifiers to the Elite Eight. Notably, the stocks with the highest industry ranks will match up with the stocks having low industry ranks.
Construction
The four top industries and their best stocks in the construction sector are as follows:
1. Building Products - Air Conditioner and Heating: Rank in the top 2%; Stock – Comfort Systems USA (FIX - Free Report) 2. Building Products - Miscellaneous: Rank in the top 3%; Stock – CRH plc CRH 3. Building Products - Maintenance Service: Rank in the top 11%; Stock – Limbach Holdings, Inc LMB 4. Building Products - Home Builders: Rank in the top 19%; Stock – NVR (NVR - Free Report)
FIX vs. NVR: Here, Comfort Systems easily outpaced NVR as it gained about 124% in a year compared with a 45.3% gain for the latter. CRH vs. LMB: Limbach is clearly the winner as it has returned nearly 155% in a year versus a gain of 77% for CRH plc.
Computer and Technology
The four top industries and their best stocks in the computer and technology sector are as follows:
1. Semiconductor Equipment - Material Services: Rank in the top 1%; Stock – ACM Research (ACMR - Free Report) 2. Semiconductor Memory: Rank in the top 1%; Stock – Micron Technology Inc. (MU - Free Report) 3. Electronics - Miscellaneous Services: Rank in the top 4%; Stock – Jack Henry & Associates (JKHY - Free Report) 4. Internet - Delivery Services: Rank in the top 5%; Stock – Vipshop (VIPS - Free Report)
ACMR vs. VIPS: Here, ACM Research wins over Vipshop as it has returned more than 169% in a year versus a gain of 6% for the latter. MU vs. JKHY: Micron Technology beats Jack Henry & Associates in the same period, gaining 100% compared with an 11% gain for JKHY.
Retail
The four top industries and their best stocks in the basic materials sector are as follows:
1. Food - Natural Foods Products: Rank in the top 5%; Stock – Sprouts Farmers Market (SFM - Free Report) 2. Retail - Supermarkets: Rank in the top 20%; Stock – The Kroger Co. (KR - Free Report) 3. Automotive - Retail and Wholesale - Parts: Rank in the top 20%; Stock – Hagerty HGTY 4. Retail - Miscellaneous: Rank in the top 22%; Stock – DICK'S Sporting Goods (DKS - Free Report)
SFM vs. DKS: SFM wins against DKS by a wide margin of 27% over the past year. KR vs. HGTY: Kroger easily defeated Hagerty by climbing 15.3% versus a 5.4% gain for the latter.
Industrial Products
The four top industries and their best stocks in the industrial products sector are as follows:
1. Metal Products - Distribution: Rank in the top 4%; Stock – Constellium (CSTM - Free Report) 2. Commercial Printing: Rank in the top 5%; Stock – Quad Graphics (QUAD - Free Report) 3. Wire and Cable Products: Rank in the top 7%; Stock – Encore Wire (WIRE - Free Report) 4. Manufacturing - Tools & Related Products: Rank in the top 7%; Stock – Enerpac Tool Group EPAC
CSTM vs. EPAC: Constellium edged past Enerpac Tool with a gain of about 43% versus 34.4% for the latter. QUAD vs. WIRE: Encore Wire beats Quad Graphics in the same period, gaining 40.3% against 28.6% for QUAD.
The winners of each industry group will compete against each other in the Elite Eight.
Elite Eight
Among the eight winning stocks, the highest average earnings surprise over the past four quarters was used to decide the winners of each sector that should advance to the Final Four.
FIX vs. LMB: Comfort Systems delivered an average earnings surprise of 25.49% compared with 105.21% for Limbach. Hence, LMB wins over FIX.
ACMR vs. MU: ACM Research wins with an average earnings surprise of 255.72% over the past four quarters against 59.60% for Micron Technology.
SFM vs. KR: Sprouts Farmers Market wins over The Kroger with its average four-quarter beat being 9.99%, higher than 8.52% for KR.
CSTM vs. WIRE: Here, Encore Wire is clearly the winner, with an average earnings surprise of 3.98% versus a negative surprise of 30.52% for Constellium.
Final Four
We now have the best stocks from four sectors. To advance to the next level, we have considered the year-over-year earnings growth for fiscal 2024. Let us once again dig into the Zacks Industry Rank of the four stocks to decide the contenders.
Limbach Holdings Inc (LMB) – Zacks Industry Rank in the top 11% ACM Research (ACMR - Free Report) – Zacks Industry Rank in the top 1% Sprouts Farmers Market (SFM - Free Report) – Zacks Industry Rank in the top 5% Constellium (CSTM - Free Report) – Zacks Industry Rank in the top 4%
So, in the matchups, we have ACM Research and Limbach on the one side and Constellium and Sprouts Farmers Market on the other.
ACM Research vs. Limbach: ACM Research earnings are expected to decline 0.61% for this fiscal year, while Limbach will likely see 6.8% growth. As a result, LMB wins and advances toward the final round to take on the winner of CSTM vs. SFM.
Constellium vs. Sprouts Farmers Market: Here, earnings at CSTM are expected to grow 109.9% for this year, while SFM will see earnings growth of 3.87%. With a higher projected earnings growth rate, CSTM wins and will face Limbach for the championship.
The National Championship
Let’s look at the VGM Score (V stands for Value, G for Growth and M for Momentum), which is simply a weighted combination of the three. The VGM Score rates each stock on its combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum across the board. Stocks with a VGM Score of A or B and a Zacks Rank of #1 or #2 offer better returns, on average, than the individual components, as it considers three times as many items that are correlated to future stock returns.
There is a tie between the two candidates – Limbach and Constellium – as both of them have a VGM Score of A. However, Limbach wins with a Growth Score of A versus B for CSTM. Both have a Value Score of A and a Momentum Score of F.
Result
Based on our internal research and metrics, Limbach Holdings, having a Zacks Rank #2 and a VGM Score of A, emerges as the winner of the 2024 March Madness contest and could be a top bet for this year. Limbach provides building systems. It engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. The stock has a market capitalization of $471.6 million. With Fed rate cuts likely this year, LMB looks a compelling choice for investors.
While it was exciting and fun to dribble toward the winning stock, we expect the twists and turns in the NCAA tournament to lead to some dramatic moves in the investment world.
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Filling Top-Ranked Stocks in NCAA "Sweet 16" Brackets
The National Collegiate Athletic Association (NCAA) Division I Men's Basketball Tournament, popularly known as March Madness, kicked off last week and is expected to continue for two more weeks. The champion will be crowned on Apr 8 at the State Farm Stadium in Glendale, AZ. The tournament works its way up from 64 college teams to “Sweet Sixteen,” to be played on Mar 28, followed by “Elite Eight,” “Final Four,” and ultimately, the championship.
The extravaganza is not limited to the sports space but spreads to the investment world as it fuels growth in various corners such as media, advertising, restaurants, hotels and airlines. Millions of Americans seek to capitalize on this opportunity by enthusiastically filling in the brackets that could lead to handsome returns from the stocks to be wagered on.
Since the tournament has reached Sweet Sixteen, let’s start filling the brackets from this level and then compare those as we do for March Madness to get to the real winner.
Here’s How to Pick the Sweet 16 Stocks
Akin to the basketball championship, we have chosen four sectors – construction, computer and technology, retail and industrial products – out of the 16 Zacks sectors that have outperformed over the past year. We have picked the four best industries (within the top 45%) from each sector with the help of the Zacks Industry Rank.
Then, we picked one stock from each industry having a Zacks Rank #1 (Strong Buy) or 2 (Buy) with the highest market capitalization in order to get the Sweet 16 stocks. Top-ranked stocks indicate rising earnings estimates and those with strong earnings momentum are more likely to outpace the market. This was a cakewalk, courtesy of the Zacks Stock Screener. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Once the stocks were chosen, one-year performance was considered for the qualifiers to the Elite Eight. Notably, the stocks with the highest industry ranks will match up with the stocks having low industry ranks.
Construction
The four top industries and their best stocks in the construction sector are as follows:
1. Building Products - Air Conditioner and Heating: Rank in the top 2%; Stock – Comfort Systems USA (FIX - Free Report)
2. Building Products - Miscellaneous: Rank in the top 3%; Stock – CRH plc CRH
3. Building Products - Maintenance Service: Rank in the top 11%; Stock – Limbach Holdings, Inc LMB
4. Building Products - Home Builders: Rank in the top 19%; Stock – NVR (NVR - Free Report)
FIX vs. NVR: Here, Comfort Systems easily outpaced NVR as it gained about 124% in a year compared with a 45.3% gain for the latter.
CRH vs. LMB: Limbach is clearly the winner as it has returned nearly 155% in a year versus a gain of 77% for CRH plc.
Computer and Technology
The four top industries and their best stocks in the computer and technology sector are as follows:
1. Semiconductor Equipment - Material Services: Rank in the top 1%; Stock – ACM Research (ACMR - Free Report)
2. Semiconductor Memory: Rank in the top 1%; Stock – Micron Technology Inc. (MU - Free Report)
3. Electronics - Miscellaneous Services: Rank in the top 4%; Stock – Jack Henry & Associates (JKHY - Free Report)
4. Internet - Delivery Services: Rank in the top 5%; Stock – Vipshop (VIPS - Free Report)
ACMR vs. VIPS: Here, ACM Research wins over Vipshop as it has returned more than 169% in a year versus a gain of 6% for the latter.
MU vs. JKHY: Micron Technology beats Jack Henry & Associates in the same period, gaining 100% compared with an 11% gain for JKHY.
Retail
The four top industries and their best stocks in the basic materials sector are as follows:
1. Food - Natural Foods Products: Rank in the top 5%; Stock – Sprouts Farmers Market (SFM - Free Report)
2. Retail - Supermarkets: Rank in the top 20%; Stock – The Kroger Co. (KR - Free Report)
3. Automotive - Retail and Wholesale - Parts: Rank in the top 20%; Stock – Hagerty HGTY
4. Retail - Miscellaneous: Rank in the top 22%; Stock – DICK'S Sporting Goods (DKS - Free Report)
SFM vs. DKS: SFM wins against DKS by a wide margin of 27% over the past year.
KR vs. HGTY: Kroger easily defeated Hagerty by climbing 15.3% versus a 5.4% gain for the latter.
Industrial Products
The four top industries and their best stocks in the industrial products sector are as follows:
1. Metal Products - Distribution: Rank in the top 4%; Stock – Constellium (CSTM - Free Report)
2. Commercial Printing: Rank in the top 5%; Stock – Quad Graphics (QUAD - Free Report)
3. Wire and Cable Products: Rank in the top 7%; Stock – Encore Wire (WIRE - Free Report)
4. Manufacturing - Tools & Related Products: Rank in the top 7%; Stock – Enerpac Tool Group EPAC
CSTM vs. EPAC: Constellium edged past Enerpac Tool with a gain of about 43% versus 34.4% for the latter.
QUAD vs. WIRE: Encore Wire beats Quad Graphics in the same period, gaining 40.3% against 28.6% for QUAD.
The winners of each industry group will compete against each other in the Elite Eight.
Elite Eight
Among the eight winning stocks, the highest average earnings surprise over the past four quarters was used to decide the winners of each sector that should advance to the Final Four.
FIX vs. LMB: Comfort Systems delivered an average earnings surprise of 25.49% compared with 105.21% for Limbach. Hence, LMB wins over FIX.
ACMR vs. MU: ACM Research wins with an average earnings surprise of 255.72% over the past four quarters against 59.60% for Micron Technology.
SFM vs. KR: Sprouts Farmers Market wins over The Kroger with its average four-quarter beat being 9.99%, higher than 8.52% for KR.
CSTM vs. WIRE: Here, Encore Wire is clearly the winner, with an average earnings surprise of 3.98% versus a negative surprise of 30.52% for Constellium.
Final Four
We now have the best stocks from four sectors. To advance to the next level, we have considered the year-over-year earnings growth for fiscal 2024. Let us once again dig into the Zacks Industry Rank of the four stocks to decide the contenders.
Limbach Holdings Inc (LMB) – Zacks Industry Rank in the top 11%
ACM Research (ACMR - Free Report) – Zacks Industry Rank in the top 1%
Sprouts Farmers Market (SFM - Free Report) – Zacks Industry Rank in the top 5%
Constellium (CSTM - Free Report) – Zacks Industry Rank in the top 4%
So, in the matchups, we have ACM Research and Limbach on the one side and Constellium and Sprouts Farmers Market on the other.
ACM Research vs. Limbach: ACM Research earnings are expected to decline 0.61% for this fiscal year, while Limbach will likely see 6.8% growth. As a result, LMB wins and advances toward the final round to take on the winner of CSTM vs. SFM.
Constellium vs. Sprouts Farmers Market: Here, earnings at CSTM are expected to grow 109.9% for this year, while SFM will see earnings growth of 3.87%. With a higher projected earnings growth rate, CSTM wins and will face Limbach for the championship.
The National Championship
Let’s look at the VGM Score (V stands for Value, G for Growth and M for Momentum), which is simply a weighted combination of the three. The VGM Score rates each stock on its combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum across the board. Stocks with a VGM Score of A or B and a Zacks Rank of #1 or #2 offer better returns, on average, than the individual components, as it considers three times as many items that are correlated to future stock returns.
There is a tie between the two candidates – Limbach and Constellium – as both of them have a VGM Score of A. However, Limbach wins with a Growth Score of A versus B for CSTM. Both have a Value Score of A and a Momentum Score of F.
Result
Based on our internal research and metrics, Limbach Holdings, having a Zacks Rank #2 and a VGM Score of A, emerges as the winner of the 2024 March Madness contest and could be a top bet for this year. Limbach provides building systems. It engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. The stock has a market capitalization of $471.6 million. With Fed rate cuts likely this year, LMB looks a compelling choice for investors.
While it was exciting and fun to dribble toward the winning stock, we expect the twists and turns in the NCAA tournament to lead to some dramatic moves in the investment world.