For Immediate Release
S&P Back at All-Time Closing Highs: 3 Prosperous Strong Buys
The market has a way of proving the majority wrong. Just when investors thought December wasn’t looking strong, the S&P 500 looks set to post a new all-time closing high in what is historically one of the most bullish seasonal periods of the year.
The S&P 500 had been getting repeatedly rejected over the past two months right around the 4715 price level as we can see below. A strong finish into today’s closing bell will signal a break above the trendline, which could lead to further strength as we head into the new year.
After skyrocketing more than 100% over the course of a month by early December, volatility has plunged back down to the range seen throughout the majority of the year. The VIX index, widely referred to as the ‘fear gauge’, is now down over 40% from the highs seen in the beginning of the month. As volatility has subsided and fears over the Omicron variant have receded, stocks look ready to continue their uptrend.
Rather than attempting to catch a falling knife from a beaten down tech stock, we recommend sticking with leaders that have held up well this year. The Zacks Agriculture – Products industry group is ranked within the top 7% of all 253 industry groups. This industry group has returned 26% on the year and we expect it to outperform the market over the next 3 to 6 months.
Historical research has illustrated that approximately half of a stock’s return is due to its industry grouping. By focusing on stocks within the top Zacks Ranked Industries, you can dramatically improve your stock-picking success.
The Zacks Agriculture – Products industry group also boasts projected EPS growth of 208.52%, far above the 21.15% for the S&P 500. Next, we’ll delve into three companies within this industry group that all sport a Zacks #1 Strong Buy ranking.
The Andersons is a global agricultural company operating in trade, ethanol, plant nutrient, and rail sectors. ANDE operates as a regional grain merchandiser with other diversified businesses such as turf production and general merchandise. Based in Maumee, Ohio, the Andersons maintain grain and production facilities throughout the Midwest and six retail locations in northern and Central Ohio.
Trading at a relatively undervalued 13.77 P/E, ANDE has proven that analyst earnings estimates have been far too conservative in the recent past. The company has posted a trailing four-quarter average earnings surprise of +293%. In November, ANDE reported EPS of $0.15, a +225% surprise over consensus. The stock is handily outperforming the market this year with a return of 58.5%.
Analysts covering ANDE are taking notice of this trend and have increased their 2021 EPS estimates by 26.61% in the past 60 days. The Zacks Consensus Estimate for full-year EPS now stands at $2.76, an incredible 2,966.67% growth rate over last year. ANDE is due to report earnings on February 15th, 2022.
West Fraser Timber
West Fraser Timber produces and sells lumber, panels, pulp and papers in the southern U.S. and western Canada. West Fraser Timber exports its lumber to the Far East, Asia, the Caribbean, Europe, the Middle East, and South America. Based in Vancouver, BC, WFG operates a diversified wood business including plywood, newsprint, wood chips, and other residuals.
For the value seekers amongst us, WFG is trading at a highly undervalued 3.14 P/E. The company has beaten earnings estimates in each of the last three quarters and has delivered an average positive surprise of 13.65% over the past year. WFG stock has followed suit, climbing 42.3% this year and showing strength as we close out the final trading days of 2021.
Analysts covering the firm have upped their 2021 WFG EPS estimates by 5.09% in the past 60 days. The Zacks Consensus Estimate for full-year earnings is now $28.26, representing a 208.52% increase compared to last year. WFG is scheduled to report quarterly earnings on February 10th.
Bunge Ltd. operates as a global agribusiness and food company. Founded in 1818 and headquartered in St. Louis, MO, Bunge processes, produces, markets and distributes food on five different continents.
Similar the other stocks in this industry group, Bunge is relatively undervalued at a 7.39 P/E and has strung together a notable history of earnings surprises, averaging a +105.73% beat over the past four quarters. BG most recently reported EPS in October of $3.72, a +169.57% surprise over estimates. The consistent earnings beats have supported the stock’s 41% ascent on the year.
What the Zacks Model Unveils
The Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently witnessed positive earnings estimate revision activity. The technique has proven to be very useful in predicting positive surprises. In fact, when combined with a Zacks Rank #3 or better, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
BG has an ESP of +3.16%. Our model predicts yet another earnings beat for the upcoming earnings announcement.
Analysts covering BG have augmented their full-year earnings estimates by 35.43% over the past 60 days. The Zacks Consensus Estimate for 2021 EPS is currently $12.04, translating to growth of 45.06% over 2020. BG is set to report earnings on February 9th.
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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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