Looking back at the big winners from last year and this year, it
looks so obvious, in hindsight, where the most opportune time to
have gotten in would've been.
Hanesbrands (HBI), for example, had gained 127.8% from the start of
2013 thru yesterday (April 29th, 2014). A stellar gain in and of
itself, and also when compared to the S&P's 31.7%.
But, what if HBI wasn't on your radar screen at the beginning of
the year? How does one jump onto an upward trending stock? Of
course, you could just jump on board and hope the trend continues.
Although, that's not quite as scientific as you'd probably want.
And when looking at a chart in the upper right hand corner, you can
sometimes feel like you've missed the move.
But, there's a great way to determine if more is to come; and if
so, where to hop on board. And that's the Zacks Rank, which keys in
on earnings estimate revisions.
The Signal to Get In
There were plenty of opportunities to pick up HBI throughout 2013
and 2014. But, let's say a good chunk of the year had already gone
by and they were already up over 68% (which is precisely what HBI
was up throughout the first 9 months of 2013).
If you weren't already in it, and you were looking for a buy signal
to get in, you would've gotten it on October 11th, 2013.
That's when it came off of a brief Zacks Rank #3 (Hold), and was
newly upgraded to a Zacks Rank #1, Strong Buy. At that time, HBI
was trading at $60.23. Over the next 6 months, their earnings
estimate revisions were raised 28 times in a row, going from $4.14
to $5.12 for a 23.77% increase; they positively surprised 3 times
in a row (actually as many as 6 in a row from the start of the
year); and produced a return of 34.7% since that signal to get in
vs. the S&P's 10.3%.
Below is a chart that illustrates the entire move for HBI from the
beginning of 2013 thru 4/29/14. The black line is the price. The
blue dotted line represents the upward earnings estimate revisions
of the consensus. And the green arrows show the positive surprises
throughout the run.
Note, the vertical line you see illustrates where it went from a
Zacks Rank #3 to a Zacks Rank #1 we described above. After such a
great run, I'm sure there were plenty of people who looked at the
stock back then and concluded that the run was over. We of course
know it wasn't. But, with a new Zacks Rank #1 amid ever-increasing
upward revisions, the likelihood was quite high that there was a
lot more to go. And there was.
Chart courtesy of the Research Wizard
How to Get Stocks Like These on Your Radar Screen
So how can you put stocks like these on your radar screen and enjoy
the same kind of returns?
1) Take a look at the Zacks Rank #1 Additions section each day.
Below is a screen shot of what that table looks like. There you'll
see the company name, its industry, its price and the date it was
added as a Zacks Rank #1.
2) Then go to the Price and Consensus Chart. You can get there by
clicking on the ticker in the table. That'll take you to the Quote
Overview page. From there you can select the Price and Consensus
The one below is of Hanesbrands. There you'll see a price chart,
along with the annual consensus numbers layered on top. You want to
see the consensus line(s) going up, and preferably at an even
steeper pace than the consensus that preceded it. And of course,
you should see the price following it. The one below is picture
perfect. And there are hundreds of others just like it. All you
have to do it look.
3) You should also look at the Detailed Estimates page. You'll see
a link to that page on the left margin. There you'll see the four
factors of the Zacks Rank, which includes: Agreement, Magnitude,
Upside and Surprise.
For example, here's a screenshot of the Magnitude table. You'll see
the trend of the consensus from what it was 90 days ago, to 60 days
ago, to 30 days ago, to 7 days ago and to the current estimate.
We're still using HBI as an example here. And you can see that for
the current quarter, its estimates went from $1.00 up to $1.48
today (up 48%), and the current year went from $4.66 up to $4.97
(up 6.65%). You can see the same upward trajectory for the next
quarter and next year.
Your New Daily Routine
Consider making this your new daily routine.
One of the reasons why some people underperform in their
investments is because their universe of familiar stocks is small.
And this limits their ability to find new and better stocks. But by
scanning the new Zacks Rank #1 list, and then checking out the
Price and Consensus chart along with the four factors on the
Detailed Estimates page (like the Magnitude we just went over),
you'll be amazed at the new and exciting stocks you're getting to
know. And the few minutes a day you spend checking them out could
transform your portfolio.
Give it try. You'll be glad you did.
Click here to find more Zacks Rank #1 Stocks.
Disclosure: Performance information for Zacks' portfolios and
strategies are available at:
To read this article on Zacks.com click here.