Yahoo Finance Early Signals of Home Run Stocks
Finding stocks that have huge jumps in price is pretty easy. However, knowing when to get rid of stocks that have been good to your portfolio isn't easy. We have developed a system that helps identify stocks that are likely to jump, while also providing a great discipline for locking in gains before they get wiped out.
In our experience, most of the stocks that have the big pops are the smaller ones. A solid quarterly report or even a small acquisition can change the game for these stocks, usually in a way much more significant than is found in big caps.
Let's dig a little deeper into this method and highlight how we find the small cap stocks that are under the radar yet still hold explosive power.
Stealth Stocks
Small caps are not the specialty of most investors. The reasons are plentiful, but the most obvious are that these companies are small and not that visible to most investors. As the saying goes: 'out of sight, out of mind.' If you do not have a lot of daily interaction with their products or services, it is very likely that you have never heard of most of them.
These are not the stocks that had the media swooning on their IPO day. At best, they were offered the opportunity to ring the opening bell at either of the stock exchanges. To be certain, companies under $5 billion in market capitalization rarely find the spotlight.
Despite these challenges, there are still plenty of analysts willing to cover these smaller names. Analysts do this to fill out their coverage of a particular sector or try to gain insight from the suppliers to the bigger companies. They provide us with two key components that drive our market-beating results.
More . . .
--------------------------------------------------------------------------------------------------------
Today's uncertain market presents an ideal opportunity to jump in and buy the best long-term growth stocks at discounted prices. Our Home Run Investor portfolio specializes in finding these great investments year in and year out. The proof is in our market-topping returns: +44% in 2013 and +72% going back to 2012.
Our team has just uncovered a shipping company with the potential for big gains. We will be sharing this recommendation with investors on Monday, October 6 along with several other attractive growth stocks currently in the Home Run Investor portfolio.
--------------------------------------------------------------------------------------------------------
Early Warnings of Big Moves
Submarines use sonar, aircraft uses radar and baseball players try to steal signals. All of these practices are a means of gaining information about what is coming next. They are often overlooked, but there are several examples of stocks giving off signals about a future big move.
One of the best signals that a stock is about to pop higher is when analysts move revenue expectations higher. It sounds so simple yet it is often dismissed entirely because it can't be that easy! The surprising truth is that if a stock is going to have a blowout earnings report, more times than not it will need to see a material increase in revenue. At the same time, a reduction in revenue estimates is a warning sign of bad things to come.
Of course just finding higher revenues is not enough. There are plenty of examples of stocks that see big one time moves or seasonal events that can fool investors. There needs to be a mixture of large increases in revenues and some discipline on expenses as well. That combination will drive big earnings...and earnings drive stocks.
Earnings Drive Stocks
It probably comes as no surprise that earnings are one of the most widely followed tools used to value stocks. The PE equation is dependent on E (earnings) much more than the P (Price). The earnings can simply be found by looking at the income statement, but investors generally buy a stock for the future earnings, not what was done in the past.
Most investors know that the forward earnings multiple is more important than the trailing multiple. That forward part of the equation comes from the analysts' models that forecast sales, expenses and, yes, earnings. From these models we gather a consensus of projected earnings to derive the forward PE multiple.
Knowing when the earnings estimates are moving higher is a key ingredient in our recipe of success. The Zacks Rank is predicated on identifying the stocks with the highest quality of estimate increases. At any one time, approximately 200 stocks will carry the best rank, a Zacks Rank #1 (Strong Buy). By combing big increases in expected revenue with small cap stocks that are Zacks Rank #2 (Buy) or better, we improve our chances of hitting a home run.
So How Can You Find Home Run Stocks for Your Portfolio?
Look no further than Zacks' Home Run Investor. This portfolio recommendation service narrows down strong Zacks Rank stocks to the few that have exceptional potential to blast through the normal 1-to-3 month profit zone. These are companies that could continue to generate positive earnings surprises quarter after quarter.
It has consistently uncovered long-term growth stocks and ridden them to gains of +50%, +100% and more. In fact, this proven strategy has substantially outperformed the S&P 500 with an overall gain of +44.1% in 2013 and a +72% return going back the past two years.
Today, you can see all of the current recommendations we have, plus the fresh pick with the potential for impressive gains. It will be posted this Monday, October 6 and you can be among the first to get in at the very beginning of its climb.
Learn more about Home Run Investor now >>
All the best,
Brian Bolan
Brian is our aggressive growth expert and one of the hottest hands at Zacks who specializes in double-digit stock gains. He is the editor of Zacks' Home Run Investor.
