For immediate release
Chicago, IL – June 16, 2022 – Today’s Zacks Investment Ideas feature spotlights Unum Group UNM.
The 3 triggers that predict explosive gains
It’s safe to say that 2022 has been a tough market environment for bulls. Stocks and bonds have been hit hard, and there have been few places to hide and avoid the current market rut. While energy has been one of the undisputed leaders, many energy stocks are now extended and have started falling in recent days as investors take profits.
In a time of uncertainty, rising inflation and interest rates, and a very real possibility of recession, how do we identify where to put our investment capital given this kind of market dynamics? ?
Let’s review three triggers that will help guide investors to stocks that are outperforming the market. Using this type of process can provide a safe haven for investors’ capital in the future.
Industry Groups Association
We can start by detecting the main industrial groups. The Zacks Industry Group Rankings make this process easier for investors, by ranking industries based on revisions to the earnings estimates of the underlying stocks within each industry. So, if stocks in a given group experience positive earnings reviews, that industry will receive a higher ranking. Let’s take an example.
The Zacks Insurance – Accident and Health Performance industry is ranked in the top 29% 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. Digging a little deeper, this industry has held up relatively well (-7.6% since the start of the year) compared to the S&P 500 (-20.98% since the start of the year).
Quantitative research studies suggest that about half of a stock’s future price appreciation is due to its industry group. By targeting the actions contained in the major industry groups, we can significantly improve our chances of success.Rise in revenue estimates
Positive revisions to earnings estimates are at the heart of the Zacks ranking. Our research shows that rising earnings estimates are the most powerful force affecting stock prices. Only the top 20% of all stocks that experience the largest revisions are ranked either Zacks #1 (Strong Buy) or Zacks #2 (Buy). Let’s build on our example.
Within the performance industry Zacks Insurance – Accident and Health, Unum Group is a Zacks Rank #2 (Buy) stock. The insurance company has seen a steady stream of positive earnings estimate revisions lately. For the current year, eight different analysts have raised their UNM EPS estimates by 13.62% over the past 60 days.
The Zacks 2022 consensus estimate is now $5.09 per share, which translates to a growth rate of 17.01% over last year. This is the type of trend we want to look for when narrowing down our list of stocks to include in our portfolio.
Rating – Putting it all together
With industry leading power behind earnings revisions, the final trigger to help guide our process is to locate stocks that are relatively undervalued. These stocks typically attract consistent buying interest from institutions. Institutional investors are the big buyers (think pension funds, hedge funds, endowments, etc.) who have the power to really move stock prices.
Individual investors have a key advantage over institutions that give them a head start in terms of speed. While it can take a long time for institutions to build or sell a position, individual investors have the ability to buy or sell stocks quickly.
By focusing on stocks such as UNM that are among the major industry groups, that are experiencing positive earnings estimate revisions, and that are relatively undervalued, we can narrow our list of stocks to those with the best upside potential. profit.
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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.
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