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The Zacks Analyst Blog Highlights: Dell Technologies, Marvell Technology, Verint Systems, RH and Abercrombie & Fitch

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For Immediate Release

Chicago, IL – January 9, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Dell Technologies Inc. (DELL - Free Report) , Marvell Technology Group Ltd. (MRVL - Free Report) , Verint Systems Inc. (VRNT - Free Report) , RH (RH - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .

Here are highlights from Tuesday’s Analyst Blog:

Stocks to Benefit from the “January Effect”

Stocks posted back-to-back gains on Jan 7, igniting hopes that a revival is in the works after the most dismal December since the Great Depression. This was in keeping with the historical phenomenon known as the January Effect. This is a direct result of investors selling stocks at the end of a year in order to offset capital gains, only to redeploy funds obtained from these sales at the start of the New Year.

Tech stocks, the darlings of the bourses till last year, seem to have found fresh favor with investors. This is evident from the interest shown in Netflix’s stock, which is recovering from a dismal second half of last year. Meanwhile, bullish jobs data and trade talks are boosting retail stocks. Investing in tech and retail would enable you to make the most of this January Effect.

Understanding the January Effect

To correctly understand this phenomenon, it is necessary to examine December’s stock rout more closely. The majority of market watchers have ascribed these losses to President Trump’s tweets and his protectionist trade policies. However, one factor that has been largely ignored is tax selling.

According to DataTrek Research co-founder Nicholas Colas, this tax fueled sell off will lead to a rebound in January. This is because when fund managers are face falling stock prices, they don’t just sell winners to reap profits. Some losers are also sold to offset the increase in tax liability caused by capital gains.

Colas thinks this sort of tax selling did occur in December. The sales proceeds are now being reinvested in equity markets, leading to gains in January. According to Matrixtrade.com’s Ed Matts the S&P 500 has gained 1.8% on average in January since 1950. This is substantially better than the average increase of 0.7% recorded for other months.

Can Positives Outweigh Negatives This Month?

There is some evidence to show that the influence of this effect has declined since it was discovered in 1976. At the same time, a good January for stocks has a strong correlation with strong annual performance in the months to follow. Matts puts its correlation coefficient at 0.25, which is significantly strong, while it is only 0.016 for other months.

Ultimately, it is important to evaluate the factors at play at this point in order to determine whether the January Effect will come true this time around. A long and bruising trade war with China and a partial government shutdown are the major negatives confronting investors this month.

However, progress is more than evident on the trade talk front with China’s vice premier Liu He attending negotiations with top U.S. officials on Jan 7. Strong jobs’ numbers are providing fresh evidence that the U.S. economy remains robust, boosting retail stocks in the process.

And tech stocks, which had fallen out of favor with investors, are rebounding.  The likes of NVIDIA, Twitter, Amazon and salesforce.com gained 5.3%, 4.6%, 3.4% and 3.1%, respectively, on Jan 7.  

Our Choices

Market watchers think that the gains recently experienced by stocks can be ascribed to a historical phenomenon called the January Effect. As a result, tech stocks have once again found favor with investors. Retailer stocks are also witnessing gains, also boosted by a bullish jobs report.

Investing in tech and retail would enable you to reap maximum benefits from the January effect this year. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM Score. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dell Technologies Inc. is a designer, developer, manufacturer and seller of information technology products and services.

Dell Technologies has a VGM Score of A. The company’s projected growth rate for the current year is 1%. The Zacks Consensus Estimate for the current year has improved by 2.1% over the last 30 days.   

Marvell Technology Group Ltd. is a fabless designer, developer and marketer of analog, mixed-signal and digital signal processing integrated circuits.

Marvell Technology has a VGM Score of B. The company’s projected growth rate for the current year is 4.8%. The Zacks Consensus Estimate for the current year has improved by 7.8% over the last 30 days. 

Verint Systems Inc. is a leading provider of analytic solutions for communications interception, digital video security and surveillance, and enterprise business intelligence.

Verint Systems has a VGM Score of B. The company’s projected growth rate for the current year is 12.9%. The Zacks Consensus Estimate for the current year has improved by 2.3% over the last 30 days. 

RH is a leading luxury retailer in the home furnishing space.

RH has a VGM Score of A. The company’s projected growth rate for the current year is more than 100%.

Abercrombie & Fitch Co. is a specialty retailer operating through two segments, Hollister and Abercrombie.

Abercrombie & Fitch has a VGM Score of B. The company’s projected growth rate for the current year is 42.2%. The Zacks Consensus Estimate for the current year has improved by 1.1% over the last 30 days. 

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.



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