For Immediate Release
Chicago, IL - February 24, 2017 - Zacks Value Investor is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here: ( https://www.zacks.com/stock/news/250402/dont-be-fooled-by-cyclical-stocks )
Don't Be Fooled By Cyclical Stocks
Welcome to Episode #31 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service , shares some of her top value investing tips and stock picks.
Recently, she's been having some Twitter and Stocktwits "discussions" with investors about what makes a cheap stock.
Just because a stock has dropped big, even if it's fallen 50% or more, that doesn't mean a stock is necessarily "cheap" or a "value." Certainly, that scenario is one that a value investor would want to investigate further.
Tracey has covered value traps on the podcast before but this week she turns to its devious cousin: the cyclical stock.
Companies are known as cyclicals when their earnings rise and fall with the mood of the economy.
So, for example, a luxury automaker, a motorcycle manufacturer and homebuilders are likely cyclical as their earnings rise when the economy is good and consumers feel bullish enough to buy that new car or new house and their earnings fall when there is a recession.
Cyclical stocks can appear to be cheap, especially when earnings are just starting to decline.
Trinity Industries Isn't a Value
A good example of this right now are the railcar manufacturers, Trinity Industries (NYSE: TRN - Free Report ) and Greenbrier (NYSE: GBX - Free Report ).
In 2016, Trinity looked cheap, as it earned $2.25. But earnings are on the decline due to a cyclical drop in rail car orders that will likely last several years.
In 2017, the Zacks Consensus is calling for $1.30. With shares near $30, and the slide in earnings, suddenly Trinity went from having a P/E of around 13 to having one around 26. It's obviously not cheap any longer.
How do you avoid the cyclicals?
Keep an eye on earnings estimates. What direction are the estimates moving? If they were going up for years but now are on the decline for years, that's a red flag.
If you're trying to stay away from these false cheap stocks, what should you be buying right now instead?
Look for companies with rising earnings estimates and businesses that won't be as impacted by an economic slowdown.
3 Value Stocks with Rising Earnings Estimates
1. Western Digital (NASDAQ: WDC - Free Report ) has a forward P/E of 14.5. Earnings expected to grow by 38% this fiscal year.
2. Seagate Technology (NASDAQ: STX - Free Report ) has a forward P/E of 10.5. Earnings forecast to rise 99% this fiscal year.
3. First Data Corporation (NYSE: FDC - Free Report ) has a forward P/E of 12.5. Earnings projected to jump 23% in 2017.
What else does Tracey think about the cyclicals and finding cheap stocks while the market is hitting record highs?
Tune into this week's podcast to find out.
Want more value investing insights from Tracey?
Check out her weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks Tracey thinks are the best bargains now.
It holds between 20 and 25 value stocks for the long haul. Click here to learn more.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros .
Get the full Report on TRN - FREE
Get the full Report on GBX - FREE
Get the full Report on WDC - FREE
Get the full Report on STX - FREE
Get the full Report on FDC - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com/performance
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 https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Trinity Industries, Inc. (TRN): Free Stock Analysis Report
Greenbrier Companies, Inc. (The) (GBX): Free Stock Analysis Report
Western Digital Corporation (WDC): Free Stock Analysis Report
Seagate Technology PLC (STX): Free Stock Analysis Report
First Data Corporation (FDC): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
