For Immediate Release
Chicago, IL – November 26, 2024 – Today, Zacks Investment Ideas feature highlights Vertiv Holdings VRT.
Gobble Gobble: A Winning Stock System to Be Thankful For
“If you are really thankful, what do you do? You share.” – W. Clement Stone
The major US indexes remain in the midst of a staggering November rally as we head into the Thanksgiving holiday. From the late-October lows, the S&P 500 has risen nearly 5%, the Dow is up better than 6%, and the tech-heavy Nasdaq has climbed slightly more than 5%. The incredible rally has caught many investors off guard.
Sector rotation has been on full display in this new post-election era as market participants appear to be shifting into areas such as industrials, financials, and consumer discretionary stocks. This is a healthy sign that this new bull market can be sustained as market breadth broadens out.
The equal-weighted S&P 500 ETF outperformed its market-weighted counterpart over the past month, another sign that this bull market is alive and well. This means that the vast majority of stocks – not just big tech and mega-cap companies – are helping to sustain this promising run.
We’re entering a shortened trading week amid the Thanksgiving holiday. The US stock market will be closed on Thursday and will also close early (1 p.m. ET) on Friday.
Throughout the year, we here at Zacks have emphasized the bullish tailwinds that are helping to fuel this market rally. Positive seasonality is underway, corporate earnings have come in above expectations, and the broader inflation trend continues to decline off the peak two years ago. The fact that the labor market is holding up so well is the biggest theme in my opinion, and recent jobless claims reports have confirmed this resilience.
Looking ahead, the month of December is bullish from a historical perspective; over the last 20 years, the Christmas-themed month has averaged a positive return of about 1.1%.
With the holiday season now in full swing, let’s review a stock selection process that has consistently identified leading stocks.
Zacks Industry Rank: Improve Your Stock-Picking Success
Zacks Investment Research employs several proprietary methodologies to make it easier for investors to detect top stocks at any given point in time. One such method is the Zacks Industry Rank, which is a great starting point to begin building out your portfolio. Using this investment tactic, we’ll start with a leading industry group in the current market environment.
This system harnesses the power of the Zacks Rank, meaning that the top-ranked industries contain more stocks that are receiving upward earnings estimate revisions. Simply put, your most profitable stocks will be those with positive earnings estimate revisions in the industries enjoying the same.
Our industry ranking system sorts companies into more than 250 industry groups. The Zacks Industry Rank is calculated by averaging the Zacks Rank for all individual stocks within a specific industry. A recent 10-year backtest has shown that stocks within the top 50% of all Zacks Ranked Industries outperformed the bottom half by a factor of more than 2 to 1.
Let’s take a look at an example. The Zacks Computers – IT Services industry currently ranks in the top 24% out of more than 250 Zacks Ranked Industries. Quantitative research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. Focusing on stocks within the top-performing industries provides a constant tailwind to our investing results. Including this step in our selection process also allows us to filter our investment list and select stocks with the best profit potential.
Narrow Down the Investment Universe with the Zacks Rank
Once the top industry groups are identified, we can peel back the curtain to find stocks with the highest Zacks Rank. Stocks with rising earnings estimate revisions have significantly outperformed the S&P 500 year after year. This ranking system uses five different ranks: #1 (Strong Buy), #2 (Buy), #3 (Hold), #4 (Sell), and #5 (Strong Sell).
Our top-down process narrows the investable universe, starting with the Zacks Computers – IT Services industry (top 24%). Let’s dive deeper into a leading Zacks Rank #1 (Strong Buy) stock contained within this top industry.
Vertiv Holdings is a global designer and manufacturer of critical digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial environments.
The company offers AC and DC power management products, thermal management products, integrated rack systems, and modular solutions that are integral to technologies such as e-commerce, online banking, energy storage, wireless communications, and online gaming.
As we can see below, Vertiv boasts a solid Zacks Rank due to positive earnings estimate revisions. The company has surpassed earnings estimates in each of the past four quarters, delivering a 10.1% average earnings surprise over that timeframe. Analysts covering VRT increased their EPS estimates for next year by 8.16% in the past 60 days. The fiscal 2025 Zacks Consensus Estimate now stands at $3.58/share, which would mark a 33.2% improvement relative to this year.
Select Stocks Showing Relative Strength
We want to look for stocks that are breaking out to the upside and are experiencing high levels of buying pressure. These companies tend to hold up well through pullbacks and outperform the market over long periods of time.
Vertiv Holdings fits the bill as the stock remains in a strong uptrend and has made a series of 52-week highs. VRT shares have widely outperformed the market this year with a better than 180% return.
Employing a top-down approach utilizing the various Zacks Rank systems can help investors find leading stocks like VRT more easily. Taking full advantage of the AI theme, Vertiv Holdings appears well-positioned to extend its recent gains.
Bottom Line
Despite the shortened week ahead, it’s a big one in terms of data that includes minutes from the Fed’s November meeting, a Q3 GDP revision, and October inflation (PCE) figures.
We’ve now received well over 90% of S&P 500 earnings results from the third quarter. Total earnings for these companies are up 8.1% from the year-ago period on 5.5% higher revenues. Estimates for the 4th quarter appear to be holding up rather well. Looking ahead, earnings growth is expected to accelerate in the early quarters of 2025.
From all of us here at Zacks, we wish you a happy Thanksgiving.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Today, See These 5 Potential Home Runs >>Vertiv Holdings Co. (VRT) : Free Stock Analysis Report
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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.
