For new and old investors, taking full advantage of the stock market and investing with confidence are common goals. Zacks Premium offers many different ways to do both.
The popular research service can help you become a smarter, more confident investor by giving you access to daily updates of the Zacks Rank and Zacks Industry Rank, the Zacks #1 Rank List, Equity Research Reports, and Premium Stock Screens.
Zacks Premium also includes the Zacks Style Scores.
What are the Zacks Style Scores?
The Zacks Style Scores, developed alongside the Zacks Rank, are a group of complementary indicators that help investors pick stocks with the best chances to beat the market over the next 30 days.
Each stock is given an alphabetical rating of A, B, C, D or F based on their value, growth and momentum qualities. With this system, an A is better than a B, a B is better than a C, and so on. The better the score, the more likely the stock will perform better.
The style scores are divided into four categories:
Value score
For value investors, it’s about finding good stocks at good prices and discovering which companies are trading below their true value before the broader market catches on. The Value Style Score uses ratios such as P/E, PEG, Price/Sales, Price/Cash Flow and many other multiples to help you select the most attractive and competitively priced stocks.
Growth score
Growth investors, on the other hand, are more concerned about a company’s financial strength and health, as well as its future prospects. The Growth Style Score examines things like expected and historical earnings, sales and cash flow to find stocks that will experience sustainable growth over time.
Momentum score
Momentum traders and investors live by the saying “the trend is your friend.” This investment style is about taking advantage of upward or downward trends in the price or earnings prospects of a stock. Using factors such as one-week price changes and the monthly percentage change in earnings expectations, the Momentum Style Score can indicate favorable times to build a position in stocks with high momentum.
VGM score
If you want a combination of all three Style Scores, the VGM Score is your friend. It rates each stock based on their combined weighted styles, helping you find the companies with the most attractive value, the best growth forecast and the most promising momentum. It is also one of the best indicators to use with the Zacks Rank.
How Style Scores Work with the Zacks Rankings
The Zacks Rank is a proprietary stock rating model that uses the power of earnings estimate revisions, or changes in a company’s earnings expectations, to help investors build a successful portfolio.
It’s been very successful, with #1 stocks (Strong Buy) delivering an unprecedented average annual return of +25.41% since 1988. That’s more than double the S&P 500. But because of the large number of stocks we rate, there are more than 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day.
This totals more than 800 top-rated stocks, and it can be overwhelming to try to choose the best stocks for you and your portfolio.
That’s where the style scores come in.
To maximize your returns, you want to buy stocks with the highest probability of success. This means choosing stocks with a Zacks Rank #1 or #2 that also have a Style Score of A or B. If you find yourself looking at stocks with a #3 (Hold) rank, make sure they also have a score of A or B. to guarantee as much upside potential as possible.
Because the scores are developed to work along with the Zacks Rank, the direction of a stock’s earnings estimate revisions should be a key factor when choosing which stocks to buy.
For example, a stock rated #4 (Sell) or #5 (Strong Sell), even one rated A and B, will still have a declining earnings outlook, and a greater chance that the stock price will decline as well.
So the more stocks you own with a #1 or #2 rank and scores of A or B, the better.
Stocks to watch: Barrick Gold (GOLD – Free report)
Barrick Gold Corporation, based in Toronto, Canada, is one of the largest gold mining companies in the world. The company has many advanced exploration and development projects across five continents.
GOLD is a #1 (Strong Buy) on the Zacks Rank, with a VGM Score of B.
It also boasts a Value Style Score of B thanks to attractive valuation metrics such as a price-to-earnings ratio of 16.56; value investors should be aware of this.
Four analysts have upgraded their fiscal 2024 earnings estimates in the past 60 days, while the Zacks Consensus Estimate rose $0.11 to $1.27 per share. GOLD also boasts an average earnings surprise of 21.2%.
With a solid Zacks Rank and high-quality Value and VGM Style scores, GOLD should be on investors’ shortlist.