In baseball, the home run hitters get all the press and all the
praise. They also get monster contracts worth millions of dollars.
It's hard to hit a ball over 400 feet that's traveling 90 miles per
hour, but there are athletes that do it regularly.
In the stock market, home runs happen much more frequently. They
don't even require steroids or amazing eye-hand coordination. What
they do require is research and patience. When solid research
points to stocks that have consistent growth in earnings, and is
then combined with patience, the result is often a home run.
Finding stocks that have a good history of growing earnings and
beating estimates is somewhat easy. All we have to do is look at
historical results. Looking forward is another story. The Zacks
Rank is a helpful tool that will guide you to the stocks that are
most likely to outperform over the next one to three months.
Maintenance of the research and an added dose of patience can
uncover stocks that generate returns of 25% to 50%, and many will
even be home runs of 100% or more.
1.000% Batting Average?
They can't all be home runs. Companies like Tractor Supply (TSCO)
generated home run-type numbers, but weakness in the retail space
sent that stock lower by more than 20% from recent highs. Our stop
limits protected a 50% gain that took a little more than a year to
amass. Another example would be Liquidity Services (LQDT), which
was purchased in January 2012 and had rounded second base and was
headed for third. Seeing the stock behave erratically was all we
needed to put a stop on the stock in the mid $50s to protect a
large gain of 40% in just five months.
Home Run Stocks from Zacks
Only a few companies have great potential to increase their
earnings beyond the normal 1 to 3-month Zacks Rank profit zone.
These under-the-radar small and mid caps are primed to rack up
positive earnings surprises quarter after quarter.
We'll ride them past today's erratic market for 12, even 24 months
to realize their exceptional upsides. Gains could reach +50%,
+100%, and more. Rare opportunity ends this weekend.
See these stocks now >>
Simply put, we buy stocks with the best chances of near and long
term outperformance. We then watch these stocks for indications of
estimates moving lower. When that happens, we sell the stock and
cut our losses or take a gain. We saw estimates contracting for
Sourcefire (FIRE), an Internet security company, and decided that a
5% gain was better than a 5% loss, so we took a short gain and
moved on. Similarly we had some bad timing in a purchase of
Elizabeth Arden (RDEN) that led to a small loss. The point is, we
cut our losses before they became too big to overcome.
Home Runs We Have Hit
Akron Inc. (AKRX) is a great example of a home run we have hit.
When it was added in August of 2011, the markets were in turmoil
and valuations were depressed. The company had just reported in
line earnings for the second quarter of 2011, but had given
indications that earnings were going to increase. The third quarter
of 2011 had increased expectations and the company delivered on
their promise. Earnings were up 100% from the prior quarter and 60%
ahead of expectations. The next two quarters saw beats of 42% and
33%. All the while, the stock moved higher and is now up more than
Another stock that is "rounding second base" is Smith & Wesson
(SWHC). It is up about 50% after only a few months. In late May the
stock was purchased due to numerous reports of the high demand for
guns and an improvement in EPS estimates. Valuations were getting
crushed in May, as investors were "selling in May and going away",
so we got in at a great time. Add on a positive earnings surprise
of 11% and the stock is well on its way to being hit out of the
Keep Your Eye on the Ball
Hitting home runs happens more often than you think. You just need
the right mixture. Good research to find the stocks that are likely
to outperform is key. Consistent monitoring of the earnings
estimates of those stocks also helps. Finally, a decent amount of
patience will help increase the chances of hitting more home runs.
Tomorrow's Big Hits
If you would like assistance for finding such stocks, you are
welcome to look into our
Zacks Home Run Investor
service. This long-term investment approach narrows down strong
Zacks Rank stocks to the few that have exceptional potential to
blast through our normal 1 to 3-month profit zones. These are
companies that could continue to generate positive earnings
surprises quarter after quarter.
In pursuit of gains amounting to +50%, +100, and more, we are
prepared to ride stocks for 12, even 24 months. Be sure to check
into this service now. Today's market worries present us with a
great entry point, and there is a special opportunity to save money
that ends this weekend.
Get details on
Home Run Investor
All the best,
Brian is our aggressive growth expert and one of the hottest
hands at Zacks with several double-digit gains already on the
board. He is the editor of the
Zacks Home Run Investor.
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