No matter your age or experience, making the most of the stock market and investing with confidence are common goals for all investors. Fortunately, Zacks Premium offers several 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.
It also includes access to 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
While good value is important, growth investors are more focused on a company’s financial strength and health, as well as its future prospects. The Growth Style Score takes into account expected and historical earnings, sales and cash flow to discover stocks that will see sustainable growth over the long term.
Momentum score
Momentum traders and investors live by the saying “the trend is your friend.” This investment style is all 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, a proprietary stock rating model, uses earnings estimate revisions, or changes in a company’s earnings estimates, to make building a winning portfolio easier.
Investors can count on the success of the Zacks Rank, with #1 stocks (Strong Buy) delivering an unmatched average annual return of +25.41% since 1988, which is more than double the performance of the S&P 500. But the model rates a large number of stocks, and on any given day there are over 200 companies with a strong Buy ranking, plus another 600 with a #2 (Buy) ranking.
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.
You want to make sure you’re buying stocks with the highest probability of success, and to do that you should choose stocks with a Zacks Rank #1 or #2 that also have a Style Score of A or B. such as a stock that is only ranked third (Hold), but should 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 #2 (Buy) on the Zacks Rank, with a VGM Score of A.
Momentum investors should take note of this Basic Materials stock. GOLD has a Momentum Style Score of B and shares are up 0.5% over the past four weeks.
Three analysts have upgraded their fiscal 2024 earnings estimates over the past 60 days, while the Zacks Consensus Estimate rose $0.06 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.