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.
The research service offers 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, all of which will 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 are a unique set of guidelines that rate stocks based on three popular investment types and were developed as complementary indicators to the Zacks Rank. This combination helps investors choose securities with the highest chances of beating the market over the next 30 days.
Based on their value, growth and momentum characteristics, each stock is given a rating of A, B, C, D or F. The better the score, the more likely the stock will outperform; an A is better than a B, a B is better than a C, and so on.
The style scores are divided into four categories:
Value score
Finding good stocks at good prices, and discovering which companies are trading below their true value, are what value investors like to focus on. So the Value Style Score takes into account ratios such as P/E, PEG, Price/Sales, Price/Cashflow and a host of other multiples to highlight 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 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, 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.
With over 800 top-rated stocks to choose from, it can certainly be overwhelming to choose the stocks that are right for you and your investing journey.
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.
Here’s an example: a stock rated #4 (Sell) or #5 (Strong Sell), even one with Style Scores A and B, still has a downward trend in its earnings outlook and a higher probability that its stock price will to descend.
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 #3 (Hold) on the Zacks Rank, with a VGM Score of B.
It also boasts a Value Style Score of A thanks to attractive valuation metrics such as a price-to-earnings ratio of 11.94; value investors should be aware of this.
For fiscal 2024, two analysts have upgraded their earnings estimates over the past 60 days, and the Zacks Consensus Estimate has increased $0.02 to $1.28 per share. GOLD boasts an average earnings surprise of 16.1%.
With a solid Zacks Rank and top Value and VGM Style scores, GOLD should be on investors’ shortlist.