Time flies and how. It seems as if we had just stopped discussing the fourth quarter of 2015 and now it’s almost time to gear up for the next earnings season. However, not much has changed about the financial markets, which have been quite volatile so far this year.
With the first-quarter 2016 earnings season around the corner, most investors are perplexed about where to invest, given the mixed economic signals. On the one hand, macroeconomic worries like jaded Chinese growth, soft energy markets, subdued Euro zone recovery and the strengthening U.S. dollar continued to plague the market. Again on the brighter side, investors are somewhat cheerful thanks to the rebound in oil prices, along with boosters like strong jobs and manufacturing data that injected some confidence into an otherwise drab economy.
Hence, at this juncture, even the most stoic investor would be jittery about his investment strategy. Further, the Federal Reserve’s stance on interest rate hike remains a wait and watch story.
The Winning Strategy
To emerge as a winner amid such volatility, one could look at stocks that have the potential to beat earnings estimates in their upcoming releases. An earnings beat should raise investors’ confidence in these stocks, leading to rapid price appreciation.
Selecting stocks with earnings beat potential could be quite a difficult task unless one knows the right method. One way of doing so is to choose stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or #2 (Buy) – and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have the best chance to surprise with their upcoming earnings announcements. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, chances of a positive earnings surprise are as high as 70%.
Apart from this, many investors like to look for growth stocks and fortunately, with the help of our new style score system, we have identified the key statistics to pay close attention to and thus, estimate which stocks might be the best for growth investors in the near term.
Our Growth Style Score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or #2 offer the best opportunities in the growth investing space.
4 Key Picks
