Why This Industrial Goods Stock 1 Could Be A Great Addition To Your Portfolio


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Breaking down Zacks focus list

If you could have access to a curated list of stocks to launch your investment portfolio, wouldn’t you jump at the chance to check it out?

This is what the Zacks Focus list offers. It is a 50-stock portfolio that serves as a starting point for long-term investors to build their individual portfolios. The stocks included in the list are expected to outperform the market over the next 12 months.

Plus, each pick comes with a full Zacks analyst report, making the focus list even more valuable. The report explains in detail why each stock was selected and why we believe it is good for the long term.

The portfolio’s past performance only reinforces why investors should take it as a starting point. For 2020, the Focus List gained 13.85% on an annualized basis compared to the S&P 500 return of 9.38%. Cumulatively, the portfolio returned 2,519.23% while the S&P returned 854.95%. Returns are for the period from February 1, 1996 to March 31, 2021.

Focus List Methodology

When stocks are selected for the Focus list, it reflects our enduring reliance on the power of earnings estimate revisions.

Earnings estimates are growth and profitability expectations, and are determined by brokerage analysts. Together with company management, these analysts review all aspects that could affect future earnings, such as interest rates, the economy, and sector and industry optimism.

What a company will earn down the road must also be considered, and this is why earnings estimate revisions are so important.

Stocks that receive positive earnings estimate changes are more likely to receive even more upward changes in the future. Take this example: if an analyst raised his estimates last month, he will probably do so again this month, and other analysts will follow.

Harnessing the power of earnings estimate revisions is where the Zacks Ranking comes in. The Zacks Ranking, which is a proprietary and proprietary stock rating model, uses earnings estimate revisions to help build a winning portfolio.

There are four main factors behind the Zacks rank: Accord, Magnitude, Upside, and Surprise. Each of these features then receives a raw score which is recalculated each night and compiled into the rank. Using this data, stocks are classified into five groups, ranging from “Strong Buy” to “Strong Sell”.

The Focus list is made up of stocks hand-picked from a long list of companies ranked #1 (Strong Buy) or #2 (Buy), meaning each new addition benefits from a bullish consensus on earnings among analysts.

Since stock prices react to revisions, it can be very profitable to buy stocks with rising earnings estimates. By buying stocks from the targeted list, you are therefore likely entering companies that will have increased future earnings estimates, which could lead to price momentum.

Priority List Spotlight: Deere (DE)

Based in Illinois, Deere is the world’s largest producer of agricultural equipment, manufacturing farm machinery since 1837 under the iconic John Deere brand with its green and yellow color scheme. It is the 82nd largest company in the S&P 500 index with a market capitalization of around $110 billion. It has an edge in most agricultural machinery categories because its machines come with advanced features and are better built than its competitors. Deere is currently the world leader in precision farming and remains focused on revolutionizing farming with technology, with the goal of making farming automated, easier and more precise throughout the production process.

On July 25, 2017, DE was added to the Focus listing at $126.55 per share. Shares have risen 207.77% to $389.48 since then, and the company is No. 2 (buy) on the Zacks ranking.

For fiscal 2022, nine analysts have revised their earnings estimate higher in the past 60 days, and Zacks’ consensus estimate rose $0.49 to $22.67. DE shows an average earnings surprise of 20.6%.

In addition, DE earnings are expected to increase by 19.4% for the current fiscal year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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