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5 Reasons to Bet On These 5 Buy Ranked Stocks

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·6-min read
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A tighter monetary policy isn’t the greatest news for any market, and especially not for one that has ridden a wave of Fed-subsidized economic growth, egged on by the expectation that we are finally getting the better of the virus, fresh infections notwithstanding.

So while we watch the rising yields on the 10-year and brace ourselves for the first rate hike, we already know that there’s a correction around the corner. And that’s what is keeping the lid on the market this January, a month that many analysts see as a relatively strong one for stocks.

And of course, if money is to be flushed out, it will be from the riskier assets, which basically means that growth stocks are going to come in for some punishment. But if the last couple of weeks are any indication, investors are pulling back already. So it’s only a matter of time before it will all be priced in.

So at this point, it’s pertinent for us to make a distinction between stocks that are truly valuable and therefore priced high and those that are riding on the backs of strong performers within their groups. Because in a correction such as this, underperformers are at risk of getting flushed out.

That’s why this earnings season is very important. Management commentary will clarify what companies are seeing both internally in terms of labor, costs and the supply chain, as well as externally in terms of demand.

But we can stack our chips in the right places even before companies actually report earnings by relying on tried and tested methods, such as the Zacks stock rank, the Zacks industry rank, the Zacks style scores, the Zacks earnings expected surprise prediction (ESP), analyst growth expectations for this year and their estimate revisions trends.

While the ESP helps you pick stocks that are most likely to beat estimates, it’s important to keep in mind that it is an estimation of the future based on past trends. And those past trends indicate that there’s roughly a 70% chance that a company will beat estimates when the most recent estimate is higher than the consensus (the difference being represented as the ESP). It’s based on the theory that there’s new information that the latest estimate considers, which is absent in the consensus.

Moreover, it’s also important to remember that stocks don’t always appreciate just because earnings numbers have come in better than expected. At times, it may be a good idea to cash out of stocks just as they’re rising in response to good news, especially if valuations don’t seem justified and if the broader markets don’t seem encouraging as is the case now.

That’s why the selections below have so many other things going for them as well-

Pacira BioSciences PCRX

Pacira provides non-opioid pain management and regenerative solutions for healthcare practitioners and their patients in the U.S.

Pacira shares carry a Zacks Rank #2 (Buy), which along with the Medical – Drugs industry rank of 96 (top 37%) indicates upside potential.

The Value Score of B and Growth Score of A in combination indicates strong growth potential at reasonable valuation.

Given its Earnings ESP 2.54% and Zacks Rank #2, there’s a good chance that Pacira will beat estimates when it reports on Feb 24.

Analysts too are positive about Pacira’s prospects and expect it to grow revenue and earnings by 36.7% and 42.3% in 2022. They’ve taken their estimates for the year up from $3.84 60 days ago to the current $4.06.

D.R. Horton DHI

D.R. Horton acquires and develops land, and constructs and sells residential accommodation in 31 states and 98 markets in eastern, southeastern, south central, southwestern, northwestern and northern regions of the U.S.

D.R. Horton shares carry a Zacks Rank #2 and belong to the Building Products - Home Builders industry (top 14%). It has an A for value and B for growth, which are positive indications of its potential.

The earnings ESP for D.R. Horton is 1.38, which along with the Zacks Rank #2 indicate better than average chances of an earnings surprise when DHI reports on Feb 2.

Analysts have provided estimates for both fiscal years 2022 and 2023 ending September. Accordingly, they expect D.R. Horton to grow revenue and earnings by 21.2% and 27.1%, respectively in 2022. Estimates for 2023 represent growth of a respective 7.5% and 6.9%. Estimates for both years have been climbing: for 2022 they’re up 32 cents (2.3%) and for 2023 they’re up 34 cents (2.2%).

ArcBest ARCB

ArcBest Corporation provides freight transportation and integrated logistics services.

ArcBest shares carry a Zacks Rank #2 and belong to the Transportation - Truck industry (top 9%). It has a B for value and A for growth, which are positive indications of its potential.

The Earnings ESP 2.56 along with the Zacks #2 rank indicate that the company will report a positive surprise when it reports on Feb 1.

Analysts expect the company to grow its 2022 revenue and earnings by 20.2% and 17.9%, respectively. They’ve taken their earnings estimates for the year up an average 31 cents (3.5%) in the last 60 days.

Axis Capital Holdings AXS

Through its subsidiaries, Axis Capital provides various specialty insurance and reinsurance products worldwide.

Axis Capital, with shares carrying a Zacks Rank #2, is placed in the Insurance - Property and Casualty industry (top 31%). The shares have an A grade for both value and growth, an indication of its strong potential.

Axis Capital’s earnings ESP 11.09 coupled with its Buy rank indicate that the company will beat earnings when it reports on Jan 26.

Even if it does not, it is still worth holding because analysts expect its revenue and earnings to grow a respective 7.6% and 29.2% in 2022. What’s more, they’re also comstantly raising estimates. In the last 60 days, these have gone from $5.31 to $5.57.

CF Industries CF

CF Industries manufactures and sells hydrogen and nitrogen products for clean energy, fertilizer, emissions abatement and other industrial applications across the world.

CF Industries shares carry a Zacks Rank #1 (Strong Buy) and belong to the Fertilizers industry (top 2%), indicating strong upside potential. It has a B for both value and growth, which is also encouraging.

The earnings ESP of 20.03 coupled with the #1 rank indicate good chances of outperforming estimates when CF Industries reports on Feb 16.

Analysts remain strongly optimistic about its prospects: CF Industries’ 2022 revenue and earnings are currently expected to grow a respective 43.7% and 246.4%. And its earnings estimate has increased $2.70 (27.8%) in the last 60 days.

One-Month Price Performance

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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report

CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report

D.R. Horton, Inc. (DHI) : Free Stock Analysis Report

Pacira BioSciences, Inc. (PCRX) : Free Stock Analysis Report

ArcBest Corporation (ARCB) : Free Stock Analysis Report

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