It's that time again. Every few months, I like running this screen to see which Sectors are considered the best Sectors.
Since roughly half of a stock's price move can be directly attributed to the group that it's in, it's important to stay on top of which groups are the best ones.
And with it being earnings season, you want every advantage you can get to give your stocks the highest probability of positively surprising, and going up.
I've done some testing over the past and found that, often times, just getting into an average stock in a strong group will outperform even the best stocks in a troubled group.
Put the Odds on Your Side
Just because stocks in the best groups have a tendency to outperform, this doesn't mean you can just pick anything and make money. Far from it. But it illustrates how powerful the underlying group is to the success of your stock picking.
There are several ways you can define the best Sectors or Industries.
Today, I'm going to focus on just the Zacks Rank. The best Zacks Rank stocks, on average, nearly triple the market each year. A sector or Industry is simply a group of stocks in similar businesses, so looking at the average Zacks Rank for all of the stocks in that group will tell you if that group as a whole is enjoying good times, or bad.
Remember, the Zacks Rank keys in on earnings estimate revisions and earnings surprises.
Stocks that receive upward earnings estimate revisions have a tendency of receiving even more upward earnings estimate revisions. Not only does this lead to an increase in price, but this also, in turn, is great at predicting which companies have a better possibility of positively surprising.
So the better the average Zacks Rank is for the Sector, the better the chances that your stocks have a top Zacks Rank with a greater potential for positively surprising.
And given the difficulty of the market, this is something everyone can use right now.
The Top 5 Zacks Ranked Sectors
Currently, the top 5 Zacks Ranked sectors are:
1. Transportation -- Average Zacks Rank 2.64
2. Construction -- Average Zacks Rank 2.76
3. Medical -- Average Zacks Rank 2.83
4. Consumer Discretionary -- Average Zacks Rank 2.90
5. Retail-Wholesale -- Average Zacks Rank 2.91
And here are 5 stocks, each from one of the top 5 Zacks Ranked sectors:
TGH Textainer Group Holdings Ltd.
Transportation (reports on 8/07/12)
MDC M.D.C. Holdings, Inc.
Construction (reports on 7/31/12)
BABY Natus Medical Inc.
Medical (reports on 7/26/12)
MGAM Multimedia Games Holding Co., Inc.
Consumer Discretionary (reports on 7/31/12)
NWY New York & Co., Inc.
Retail-Wholesale (reports on 7/28/12)
All of these stocks are in the top 5 Sectors as defined by the average Zacks Rank, and they are all set to report earnings within the next few weeks.
Start picking stocks in the best Sectors and Industries on your own today. It's easy to do and with the Research Wizard. Start putting the odds of success in your favor. You can do it.
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: http://www.zacks.com/performance .