The stock market is a dynamic environment. Prices can experience drastic moves in just a matter of seconds. Today’s volatility is yet another example of this type of price movement.
That’s why it is crucial to develop an investing plan that guides you to the best available profit opportunities at any given point in time. Following a proven system instead of trying to predict what will happen is a key component of any successful trading plan.
There’s no shortage of important events in the market this week that could potentially bring more volatility. This morning, the producer price index was released that showed wholesale prices rose 9.6% in November from a year ago. The Fed is set to release its decision tomorrow following a two-day policy meeting, where it is expected to wind down its bond-buying program and signal that it will begin to raise interest rates next year to curb inflation.
Options expiration is also at the end of this week, which can add to the likelihood of extreme price movements in short periods of time. It certainly seems to be the case that this week is seeing heightened volatility.
We want to be in stocks that are outperforming, preferably with lower volatility. Using the Zacks Rank to identify top stocks is a great place to start. It’s easy to invest in what you are comfortable with, such a stock like Facebook or Amazon. And while these names have been great long-term winners, that doesn’t necessarily mean they will do well year in and year out. In fact, both these stocks have underperformed the market this year.
It’s important to not get attached to a particular name. Sometimes it pays to invest in companies you may not be very familiar with but that are exhibiting the right characteristics. The market displays constant rotation, and we want to be in stocks that are trending well. The longer a trend is maintained the more significant it becomes.
Despite the increased volatility in recent weeks, the three data analytics firms we will analyze below have been making a series of 52-week highs this year and are outperforming the market. They have been trending well and have shown less volatility during the muted market pullbacks.
The Zacks Business – Information Services industry group contains all three of these companies and is currently ranked in the top 26% of all 254 industries. Quantitative studies have shown that about half of a stock’s future price appreciation is due to its industry grouping. By focusing on high-performing stocks within the top Zacks Ranked Industries, you can dramatically improve your trading success.
FactSet Research Systems Inc. (FDS)
FactSet Research Systems creates open data and software solutions geared toward investment professionals, providing instant access to financial data and analytics used to make vital investment decisions. Headquartered in Norwalk, CT, FDS delivers investment insights through its analytics, service, content and technology.
FactSet Research Systems (a Zacks #2 Buy stock) derives revenues from subscriptions to products and services such as workstations, enterprise data, analytics, research management, and trade execution. FDS continues to benefit from solid earnings and revenue growth as we can see below.
FDS shareholders have appreciated the consistent share buybacks and dividend payments. The company has also delivered an earnings beat in each quarter for the past five years. FDS most recently reported EPS back in September of $2.88, a 6.27% surprise over consensus which has aided the stock’s 40% return on the year.
FactSet Research Systems (FDS) Price, Consensus and EPS Surprise
The Zacks Consensus Estimate for EPS for the current fiscal year stands at $12.21, a 9.02% increase over last year. FDS is scheduled for its quarterly earnings report next week on December 21st.
S&P Global Inc. (SPGI)
S&P Global is a leading provider of independent ratings, benchmarks and other related services to the global capital and commodity markets. Headquartered in New York, NY, SPGI’s data analytics help a host of clients make better investment decisions in real-time.
S&P Global has an impressive history of both earnings and revenue growth, with a healthy increase recorded in each of the last six years as illustrated below.
SPGI, currently a Zacks #2 (Buy), has also built a substantial track record of earnings surprises, surpassing estimates in each quarter for the last five years. The company has produced an average positive surprise of 9.07% over the last four quarters, helping the stock climb more than 45% this year.
S&P Global (SPGI) Price, Consensus and EPS Surprise
Last year, SPGI returned over $1.8 billion to shareholders, including $1.2 billion in share repurchases and $645 million in dividend payments. Both dividends and stock buybacks should continue to boost investor confidence going forward.
Analysts covering the firm have increased their full-year earnings estimates by 3.5% in the past 60 days. The Zacks Consensus Estimate for 2021 earnings now stands at $13.62, which would represent growth of 16.51% over 2020. SPGI’s next earnings report is set for February 8th, 2022.
IHS Markit Ltd. (INFO)
IHS Markit provides information, analytics, and solutions to clients in various fields including business, finance and government. Headquartered in London, INFO is a leading provider of critical information and operates in four segments – Resources, Transportation, Consolidated Markets and Solutions, and Financial Services.
INFO has exceeded earnings estimates in each of the last 18 quarters, most recently posting EPS back in September of $0.85 – a +2.41% surprise over consensus. INFO has a trailing four-quarter average earnings surprise of +3.14%, bolstering the stock’s 49.3% return this year.
IHS Markit (INFO) Price, Consensus and EPS Surprise
IHS Markit continues to benefit from a well-diversified and global customer base along with strong brand recognition. The firm’s depth and breadth of analytics is a key competitive differentiator. For the current year, analysts are anticipating INFO sales to rise by 7.82%, while earnings are expected to grow by 12.68% compared to last year.
It’s important to keep abreast of different pockets of the market that are showing signs of outperformance. Clearly, these three data analytics firms are a great example this year and look to continue their momentum into 2022.