Here at Zacks, we offer our members many different opportunities to take full advantage of the stock market, as well as how to invest in ways that lead to long-term success.
The Zacks Premium service makes this easier. It 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 like the Earnings ESP filter. All of these can help you quickly identify what stocks to buy, what to sell, and what are today's hottest industries.
The service also includes the Focus List, which is a long-term portfolio of top stocks that boast a winning, market-beating combination of growth and momentum qualities.
Breaking Down the Zacks Focus List
Building an investment portfolio from scratch can be difficult, so if you could, wouldn't you take a peek at a curated list of top stocks?
That's what the Zacks Focus List, a portfolio of 50 stocks, offers investors. Not only does it serve as a starting point for long-term investors, but all stocks included in the list are poised to outperform the market over the next 12 months.
Additionally, each selection is accompanied by a full Zacks Analyst Report, something that makes the Focus List even more valuable. The report explains in detail why each stock was picked and why we believe it's good for the long-term.
The portfolio's past performance only solidifies why investors should consider it as a starting point. For 2020, the Focus List gained 13.85% on an annualized basis compared to the S&P 500's return of 9.38%. Cumulatively, the portfolio has returned 2,519.23% while the S&P returned 854.95%. Returns are for the period of February 1, 1996 to March 31, 2021.
Focus List Methodology
When stocks are picked for the Focus List, it reflects our enduring reliance on the power of earnings estimate revisions.
Brokerage analysts are in charge of determining a company's growth and profitability expectations, or earnings estimates. These analysts work together with company management to evaluate all factors that may affect future earnings, like interest rates, the economy, and sector and industry optimism.
What a company will earn down the road also needs to be taken into consideration, and this is why earnings estimate revisions are so important.
When a stock receives upward earnings estimate revisions, it will likely get even more positive changes in the future. For instance, if an analyst raised their earnings outlook last month, they'll probably do so again this month, and other analysts will follow.
Harnessing the power of earnings estimate revisions is where the Zacks Rank comes in. The Zacks Rank is a unique, proprietary stock-rating model that utilizes changes to a company's quarterly earnings expectations to help investors build a winning portfolio.
There are four main factors behind the Zacks Rank: Agreement, Magnitude, Upside, and Surprise. Each one of these features is then given a raw score that's recalculated every 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 comprised of stocks hand-picked from a long list of #1 (Strong Buy) or #2 (Buy) ranked companies, meaning that each new addition boasts a bullish earnings consensus among analysts.
Since stock prices respond to revisions, it can be very profitable to buy stocks with rising earnings estimates. By buying Focus List stocks, then, you're likely getting into companies whose future earnings estimates will be raised, potentially leading to price momentum.
Focus List Spotlight: Lam Research (LRCX)
Headquartered in Fremont, CA, Lam Research Corporation supplies wafer fabrication equipment and services to the semiconductor industry. In addition, it serves the related markets that rely on semiconductor processes and require production-proven manufacturing capabilities, such as complementary metal-oxide-semiconductor image sensors and micro-electromechanical systems (MEMS).
Since being added to the Focus List on December 5, 2016 at $10.05 per share, shares of LRCX have increased 644.38% to $74.81. The stock is currently a #3 (Hold) on the Zacks Rank.
11 analysts revised their earnings estimate upwards in the last 60 days for fiscal 2025. The Zacks Consensus Estimate has increased $0.22 to $3.73. LRCX boasts an average earnings surprise of 6.9%.
Earnings for LRCX are forecasted to see growth of 24.8% for the current fiscal year as well.
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Lam Research Corporation (LRCX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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