It doesn’t matter your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors. Luckily, Zacks Premium offers several different ways to do both.
The research service features daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, all of which will help you become a smarter, more confident investor.
It also includes access to the Zacks Style Scores.
What are the Zacks Style Scores?
Developed alongside the Zacks Rank, the Zacks Style Scores are a group of complementary indicators that help investors pick stocks with the best chances of beating the market over the next 30 days.
Each stock is assigned a rating of A, B, C, D, or F based on their value, growth, and momentum characteristics. Just like in school, an A is better than a B, a B is better than a C, and so on — that means the better the score, the better chance the stock will outperform.
The Style Scores are broken down into four categories:
Value Score
For value investors, it’s all about finding good stocks at good prices, and discovering which companies are trading under their true value before the broader market catches on. The Value Style Score utilizes ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and a host of other multiples to help pick out the most attractive and discounted stocks.
Growth Score
Growth investors, on the other hand, are more concerned with a company’s financial strength and health, and its future outlook. The Growth Style Score examines things like projected and historic earnings, sales, and cash flow to find stocks that will experience sustainable growth over time.
Momentum Score
Momentum investors, who live by the saying “the trend is your friend,” are most interested in taking advantage of upward or downward trends in a stock’s price or earnings outlook. Utilizing one-week price change and the monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.
VGM Score
If you want a combination of all three Style Scores, then the VGM Score will be your friend. It rates each stock on their combined weighted styles, helping you find the companies with the most attractive value, best growth forecast, and most promising momentum. It’s also one of the best indicators to use with the Zacks Rank.
How Style Scores Work with the Zacks Rank
A proprietary stock-rating model, the Zacks Rank utilizes the power of earnings estimate revisions, or changes to a company’s earnings outlook, to help investors create a successful portfolio.
It’s highly successful, with #1 (Strong Buy) stocks producing an unmatched +25.41% average annual return since 1988. That’s more than double the S&P 500. But because of the large number of stocks we rate, there are over 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day.
This totals more than 800 top-rated stocks, and it can be overwhelming to try and pick the best stocks for you and your portfolio.
That’s where the Style Scores come in.
To have the best chance of big returns, you’ll want to always consider stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B, which will give you the highest probability of success. If you’re looking at stocks with a #3 (Hold) rank, it’s important they have Scores of A or B as well to ensure as much upside potential as possible.
The direction of a stock’s earnings estimate revisions should always be a key factor when choosing which stocks to buy, since the Scores were created to work together with the Zacks Rank.
Here’s an example: a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one with Style Scores of A and B, still has a downward-trending earnings outlook, and a bigger chance its share price will decrease too.
Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.
Stock to Watch: Travelers (TRV – Free Report)
Established in 1853 and is based in New York, NY, The Travelers Companies Inc., a holding company, is principally engaged, through its subsidiaries, in providing a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States. and select international markets.
TRV is a #1 (Strong Buy) on the Zacks Rank, with a VGM Score of A.
Additionally, the company could be a top pick for growth investors. TRV has a Growth Style Score of B, forecasting year-over-year earnings growth of 44.3% for the current fiscal year.
For fiscal 2024, five analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.30 to $18.94 per share. TRV boasts an average earnings surprise of 25.4%.
With a solid Zacks Rank and top-tier Growth and VGM Style Scores, TRV should be on investors’ short list.
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