For immediate release
Chicago, IL – June 20, 2022 – Today’s Zacks Investment Ideas feature highlights Envela Corporation ELA.
Why Leaders Exit Bear Markets First
“When it comes time to buy, you won’t want to.” –Walter Deemer
Although bear markets can be painful, they are a necessary part of the business cycle that sets the stage for the bull markets that will inevitably follow. Just as the market is approaching a bottom, most investors have experienced substantial declines in their portfolios. These losses instill a degree of fear that makes them unlikely to buy after the market has steadily fallen.
At the bottom of the market, we tend to see consumer sentiment at historic lows. We also normally see a very small percentage of stocks trading above their 200-day moving averages. The percentage of S&P 500 constituents trading above their respective 200-day moving averages are approaching lows that coincided with previous market lows.
Market leaders are usually the first to emerge from a bear market. Most investors find it difficult to pull the trigger because these leaders seem to be trading too high or too expensive. So they wait, only to become frustrated over time that they didn’t buy sooner. While we’re not there yet, now is the time to do your homework and identify actions that start building foundations. These stocks will start to hit higher highs and possibly even find new ground on the way back – much sooner than the major indices will.
Bear markets create opportunities
The best performing stocks will be ahead of the broader market averages at important turning points, such as the transition from a bear market to a bull market. Leaders exit a bear market by hitting their lows first, before the indices hit their major lows. The stocks that hold up the best throughout the decline and start gaining momentum (even if the indices continue to fall) are the companies we want to target for bullish positions.
Another confirmation sign we can look for is if a stock hits a new 52-week high as it outperforms the market. Few investors have the courage to buy stocks close to new highs, when in reality these are the stocks most likely to continue to outperform. Most of the stocks that have hit 52-week highs this year are energy-related stocks, but it appears that many of these companies are extended and have taken a break recently. Let’s look elsewhere to see what might lead us as we enter the second half of the year.
The Zacks Retail – Jewelry industry group is currently ranked in the top 21% out of approximately 250 industries. Because it is ranked in the top half of all industries ranked by Zacks, we expect this group to outperform over the next 3-6 months.
Historical studies have shown that about half of a stock’s price movement can be attributed to its industry group. By focusing on the stocks of the major industries, we can significantly improve our chances of success.
Envela Corp. is a leading title in this industry. Envela buys and sells jewelry products to individual customers, resellers, municipalities and other national organizations. Its products include fine watches, bridal and fashion jewelry, diamonds and gemstones. ELA also purchases various forms of precious metals. Envela Corp. was incorporated in 1965 and is based in Irving, TX.
ELA has exceeded earnings estimates in each of the past four quarters. The company recently released Q1 EPS of $0.10 last month, a 100% surprise from the consensus estimate of $0.05. ELA delivered a surprise four-quarter average profit of 45.83%.
ELA made a 52-week high streak. The stock is up 51.8% this year as major indices are in a bear market. Growth is expected to continue for this jewelry company, as estimates call for a 13.51% increase in EPS ($0.42) over last year. Be sure to keep an eye on ELA as the stock continues to outperform.
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