Hanesbrands (HBI), for example, had gained 127.8% from the start of 2013 thru April 29th, 2014. A stellar gain in and of itself, and also when compared to the S&P's 31.7%.
But, what if HBI wasn't on your radar screen at the beginning of the year? How does one jump onto an upward trending stock? Of course, you could just jump on board and hope the trend continues. Although, that's not quite as scientific as you'd probably want. And when looking at a chart in the upper right hand corner, you can sometimes feel like you've missed the move.
But, there's a great way to determine if more is to come; and if so, where to hop on board. And that's the Zacks Rank, which keys in on earnings estimate revisions.
There were plenty of opportunities to pick up HBI throughout 2013 and 2014. But, let's say a good chunk of the year had already gone by and they were already up over 68% (which is precisely what HBI was up throughout the first 9 months of 2013).
If you weren't already in it, and you were looking for a buy signal to get in, you would've gotten it on October 11th, 2013.
That's when it came off of a brief Zacks Rank #3 (Hold), and was newly upgraded to a Zacks Rank #1, Strong Buy. At that time, HBI was trading at $60.23. Over the next 6 months, their earnings estimate revisions were raised 28 times in a row, going from $4.14 to $5.12 for a 23.77% increase; they positively surprised 3 times in a row (actually as many as 6 in a row from the start of the year); and produced a return of 34.7% since that signal to get in vs. the S&P's 10.3%.
Below is a chart that illustrates the entire move for HBI from the beginning of 2013 thru 4/29/14. The black line is the price. The blue dotted line represents the upward earnings estimate revisions of the consensus. And the green arrows show the positive surprises throughout the run.
Note, the vertical line you see illustrates where it went from a Zacks Rank #3 to a Zacks Rank #1 we described above. After such a great run, I'm sure there were plenty of people who looked at the stock back then and concluded that the run was over. We of course know it wasn't. But, with a new Zacks Rank #1 amid ever-increasing upward revisions, the likelihood was quite high that there was a lot more to go. And there was.
Chart courtesy of the Research Wizard
How to Get Stocks Like These on Your Radar Screen Now
So how can you put stocks like these on your radar screen and enjoy the same kind of returns?
1) Take a look at the Zacks Rank #1 Additions section each day.
Below is a screen shot of what that table looks like. There you'll see the company name, its industry, its price and the date it was added as a Zacks Rank #1.
2) Then go to the Price and Consensus Chart. You can get there by clicking on the ticker in the table. That'll take you to the Quote Overview page. From there you can select the Price and Consensus chart.
The one below is of Hanesbrands. There you'll see a price chart, along with the annual consensus numbers layered on top. You want to see the consensus line(s) going up, and preferably at an even steeper pace than the consensus that preceded it. And of course, you should see the price following it. The one below is picture perfect. And there are hundreds of others just like it. All you have to do it look.
3) You should also look at the Detailed Estimates page. You'll see a link to that page on the left margin. There you'll see the four factors of the Zacks Rank, which includes: Agreement, Magnitude, Upside and Surprise.
For example, here's a screenshot of the Magnitude table. You'll see the trend of the consensus from what it was 90 days ago, to 60 days ago, to 30 days ago, to 7 days ago and to the current estimate. We're still using HBI as an example here. And you can see that for the current quarter, its estimates went from $1.00 up to $1.48 today (up 48%), and the current year went from $4.66 up to $4.97 (up 6.65%). You can see the same upward trajectory for the next quarter and next year.
Your New Daily Routine
One of the reasons why some people underperform in their investments is because their universe of familiar stocks is small. And this limits their ability to find new and better stocks. But by scanning the new Zacks Rank #1 list, and then checking out the Price and Consensus chart along with the four factors on the Detailed Estimates page (like the Magnitude we just went over), you'll be amazed at the new and exciting stocks you're getting to know. And the few minutes a day you spend checking them out could transform your portfolio.
Give it try. You'll be glad you did.
By Kevin Matras
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