Taking full advantage of the stock market and investing with confidence are common goals for new and old investors, and Zacks Premium offers many different ways to do both.
With daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research Reports, and Premium Stock Screens, the research service can help you become a smarter, more confident investor.
Zacks Premium also provides access to the Zacks Style Scores.
What are the Zacks Style Scores?
The Zacks Style Scores, developed in addition to the Zacks Rank, are additional indicators that rate stocks based on three commonly used investment methods; they also help investors choose stocks with the best chances of beating 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 are more concerned about a stock’s future prospects and the overall financial health and strength of a company. So the Growth Style Score analyzes characteristics such as 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
What if you want to use all three types of investing? The VGM Score is a combination of all Style Scores, making it one of the most comprehensive indicators to use with the Zacks Rank. It rates each stock based on their combined weighted styles, helping to select the companies with the most attractive value, best growth forecast and most promising momentum.
How Style Scores Work with the Zacks Rankings
The Zacks Rank, a proprietary stock rating model, harnesses the power of earnings estimate revisions, or changes in a company’s earnings outlook, to help investors build a successful portfolio.
#1 stocks (Strong Buy) have delivered an unprecedented average annual return of +25.41% since 1988, which is more than double the performance of the S&P 500 during the same period. However, the Zacks Rank examines a lot of stocks, and there may be more than 200 companies with a Strong Buy ranking on any given day, and another 600 with a #2 (Buy) ranking.
But choosing the right stocks for you and your investment goals can be overwhelming, as there are more than 800 top stocks to choose from.
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.
The direction of a stock’s earnings estimate revisions should always be a key factor when choosing which stocks to buy, since the scores are created to work together with the Zacks Rank.
Here’s an example: a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one with a style score of A and B, still has a downward trend in its earnings outlook, and a higher chance that the stock price will fall too.
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.
Momentum investors should take note of this Basic Materials stock. GOLD has a Momentum Style Score of A and shares are up 3.8% over the past four weeks.
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 top-notch Momentum and VGM Style Scores, GOLD should be on investors’ shortlist.