Earlier this month I spent a week camping deep in the Southern
Indiana woods. With daytime temps between 90-105 and little
overnight cooling, it was probably the hottest camping trip I've
ever taken. When it's that hot, you don't really feel like moving
much, so most of my time was spent just sitting and observing. Now
I've spent a lot of time outdoors and I've watched countless nature
programs on television, but when you actually sit down with the
natural world for a few hours, you see how relentlessly competitive
it truly is--even in the sleepy Midwest.
Every animal I saw--mammals, reptiles, insects, fish, birds--were
either eating or trying to avoid being eaten. I saw swallows and
bats swooping down upon unaware insects, frogs hopping into the
pond moments before a hungry snake slithered along, coyotes
scavenging for anything they could find, a buck bounding away after
my walking stirred him from his slumber and a falcon taking off for
something unseen to me on the forest floor.
Another Form of Competition
Upon returning home, I realized how we now live in a kind of
bubble, isolated and insulated from the struggles that early humans
faced. In our modern cities, towns and houses, we've essentially
removed any natural thing that could harm us. In the woods, I was
getting bitten by much more than just mosquitoes. But now, we've
created safe environments with little to no discomfort or danger. I
wondered: Where then do we actually face highly competitive
environments? Sports, business and the stock market are the primary
things that came to mind. Perhaps that's why we find these
activities so exhilarating.
The stock market is a remarkable place where there are two sides to
every trade. For the most part, you have someone who wants to own a
stock that someone else doesn't. Think about this during your next
trade: someone actually wants to own that stock you are selling and
someone doesn't want that stock you are buying. Only one person is
right, right? After all, rational people don't go around selling
stocks that they think will go up, do they? So are you the one
that's going to eat or be eaten on a trade? Remember from
my last article
, it's not much more than a 50/50 prospect for the average
How to Survive
Even the best investors become lunch some days, but what separates
the predators from the prey is whether one is disciplined enough to
follow proven strategies, access and use information and tools
effectively, and refine and evolve their techniques. That's why I
Zacks Research Wizard
is something every individual investor needs. The Research Wizard
contains hundreds of pieces of data for each company, and it allows
you to test to see what works and enables you to adjust your
strategies to reflect changing market conditions.
Let's look at an example. Among the different
that exist, an approach that considers a combination of them is one
of my favorites. Last September, I created a multiple anomaly
strategy that's in the Research Wizard software. Here's how the
strategy performed from 2002-2011.
What's more, the Multi-anomaly strategy is up about 22% YTD. Since
I created it in September 2011, the strategy is up 52%. How's that
for an out-of-sample test?
At this point in my articles, I usually spell out the strategy's
individual criteria in detail, but I don't want to give away the
secret sauce and give something away that current RW users have
access to. So I'm only going to provide general ideas including:
- Buys high volume, small cap U.S. stocks
- Includes only highly-rated Zacks Ranks
- Contains a measure of value
- Looks at estimate revisions
- Considers stock price changes
Here are five of the ten stocks that passed the screen this week
- PHH Corporation
PHH Corporation provides business process management services for
the mortgage and fleet industries in the United States and Canada.
This small cap company rates as a Strong Buy on the Zacks Rank and
has had positive earnings surprises in four out of the last five
quarters. The stock has also experienced good recent price momentum
and remains a good value.
- Aircastle LTD
Aircastle Limited, through its subsidiaries, engages in the
acquisition, lease and sale of high-utility jet aircraft to
passenger and cargo airlines worldwide. With a Zacks Rank #1, this
company has also seen positive earnings surprises in four out of
the last five quarters. Earnings projections for the next two years
have also been increasing. Aircastle also remains a nice value and
pays a healthy dividend.
- Dycom Industries Inc.
Dycom offers engineering services, including the design of service
area concept boxes, terminals, buried and aerial drops,
transmission and central office equipment, fiber cable routing and
design for telephone companies. This company has had five straight
positive earnings surprises averaging 62%! This series of earnings
surprises has lead to increasing future earnings projections and,
therefore, a Strong Buy Zacks Rank.
- Brown Shoe Co.
Brown Shoe, a St. Louis-based company, operates as a footwear
retailer and wholesaler in the United States, Canada, China, and
Guam. This stock is up over 14% since
first recommended it
just six weeks ago. The company has a great Zacks Rank, good
valuation compared to industry peers and has seen recent earnings
estimate increases. The price momentum looks good and the stock
pays a nice dividend to boot.
- Celadon Group Inc.
Celadon, an Indianapolis-based company, provides transportation
services between the United States, Canada and Mexico. In terms of
valuation, the stock is relatively inexpensive compared to the
market averages. Amazingly, Celadon has had a positive earnings
surprise in each of the last six quarters. Earnings projections
have also been trending up as has the stock price. The stock is
also rated a Strong Buy on the Zacks Rank.
You Need an Investing Tool
For survival in the wild, many consider a knife to be the most
important tool. But if you find yourself dealing more with the
perils of the stock market, you need a tool designed and built for
the individual investor.
Zacks Research Wizard
contains hundreds of different data items available for you to test
or use one of our pre-built strategies like the Multi-anomaly. I
urge you to use it to navigate what the market may send your way.
Starting today, you are invited to use it free of charge. You'll
have 14 days to create, tweak, and backtest your strategies. At the
same time, you can see the latest picks from pre-loaded winning
strategies with average gains of up to +67.4% per year.
Learn more about your
free trial >>
Let's make some money!
Kip Robbins is a Quantitative Analyst with Zacks.com. He
analyzes screens and strategies for Zacks customers and for use in
which empowers individual investors to use market-beating screens,
build their own, and backtest their results.
Disclosure: Officers, directors and/or employees of Zacks
Investment Research may own or have sold short securities and/or
hold long and/or short positions in options that are mentioned in
this material. An affiliated investment advisory firm may own or
have sold short securities and/or hold long and/or short positions
in options that are mentioned in this material.
Disclosure: Performance information for Zacks' portfolios and
strategies are available at:
AIRCASTLE LTD (AYR): Free Stock Analysis Report
BROWN SHOE CO (BWS): Free Stock Analysis Report
CELADON GROUP (CGI): Free Stock Analysis Report
DYCOM INDS (DY): Free Stock Analysis Report
PHH CORP (PHH): Free Stock Analysis Report
To read this article on Zacks.com click here.