The S&P 500 may be up 6% for the month, but that doesn't mean stocks will continue rising through the end of the year. There are still a host of concerns that investors are grappling with, including inflation, labor shortages, and supply constraints. Since there could be some more volatility ahead, it's best to consider stocks that have a stronger chance to outperform in the months ahead.
As you may know, our POWR Ratings system was designed to find the stocks that have the best potential for outperformance. The system weighs 118 different factors for every stock. These factors help contribute to a stock's likelihood of outperformance. Stocks that have an overall grade of A or B are likely to outperform. But we can take it up a notch. The POWR Ratings also include six Component Grades and an Industry Grade.
Our research found that picking top-rated stocks in top-rated industries increases the potential for outperformance. Our analysis shows that stocks in an A or B-rated industry, on average, are more likely to outperform. So, I ran a screen for stocks with an overall grade of A in an A-rated industry. This resulted in stocks such as Gartner, Inc. (IT), Signet Jewelers (SIG), and CRA International, Inc. (CRAI).
Gartner, Inc. (IT)
IT provides independent research and analysis on information technology and other related technology industries. Its research is delivered to clients' desktops in the form of reports, briefings, and updates. Typical clients are chief information officers and other business executives who help plan companies' IT budgets.
Its huge and diverse total addressable market has low customer concentration that helps reduce operating risks. This also enables the company to have a competitive advantage against its peers. Its proprietary research content continues to drive steady revenue growth for the company. The results so far this year have led to management raising its full-year guidance.
The company's 2017 acquisition of CEB, a talent management and best practices consulting firm, helped reinforce its market strength. The combination of IT's syndicated research, and advisory offerings with CEBs practice and talent management insights allows the company to have a comprehensive suite of offerings worldwide.
IT has an overall grade of A, which translates into a Strong Buy rating. The company has a Growth Grade of A, which makes sense as its earnings per share have grown an average of 57.5% over the past three years. Analysts forecast earnings to increase 71.4% year over year in the third quarter, which is expected to report on Tuesday.
IT also has a Quality Grade of A. Its cash balance of $796 million at the end of June compares favorably to only $5 million in short-term debt. We also provide Value, Momentum, Stability, and Sentiment Grades for IT, which you can find here. IT is ranked #2 in the A-rated Outsourcing – Tech Services industry. For more top stocks in this highly rated industry, click here.
Signet Jewelers (SIG)
SIG retails diamond jewelry. Its merchandise mix includes bridal, fashion, watches, and others. The bridal category includes engagement, wedding, and anniversary purchases. Its well-known brands include Kay, Jared, Zales, and Piercing Pagoda. Like many other companies, SIG has invested in increasing its online shopping experience.
The company is on track to lead digital commerce in the jewelry industry. Management has been looking into combining the digital and in-store experience to help it gain a competitive edge. So far, the firm has been integrating its physical stores into the digital customer experience through data-driven in-store consultations and options such as buy online pickup in-store and curbside.
The company is also making interaction a part of its websites, stores, and inventory pipeline. As of now, SIG has added more than 100 features and capabilities across its digital platforms. The company has also been gaining in advancements in its Inspiring Brilliance strategy. This growth strategy focuses on expanding its big banners, boosting its service revenues, and broadening the Accessible Luxury and Value segments.
SIG has an overall grade of A and a Strong Buy rating in our POWR Ratings system. The company has a Value Grade of B, which isn't surprising, with a trailing P/E of 8.51 and a price-to-sales ratio of 0.8. SIG also has a Momentum Grade of A as the stock has shown bullish momentum over the near, mid, and long term. The stock is already up 235% so far for the year.
For the rest of SIG's grades (Growth, Stability, Sentiment, and Quality), click here. SIG is ranked #3 in the A-rated Fashion & Luxury industry. For more top-ranked stocks in this top industry, make sure to visit this link.
CRA International, Inc. (CRAI)
CRAI is a U.S.-based advisory firm that provides economic, financial, and management consultancy services. The company advises clients on economic and financial issues relating to litigation and regulatory proceedings and helps businesses set important business strategies and solve performance-related problems.
Like IT, CRAI has a diversified business with offerings that span function expertise, geographical regions, and a varied client base. Since the company is so proficient in so many industries, it can offer services to clients' varying needs. This diversification also helps lessen its dependence on one specific market and increases its ability to adapt to market changes.
Its professional team helps to maintain its reputation as providing high-quality services. This is due to a very high percentage of senior consultants that have doctorates or other advanced degrees. They are also typically recognized experts in their fields. CRAI also works with non-employee experts from top educational institutions, who also generate business for the company. Both are expected to contribute to the company's long-term growth potential.
CRAI has an overall grade of A, translating into a Strong Buy rating in our POWR Ratings system. The company has Value Grade of B as its price-to-sales ratio of 1.5 is well below the industry average of 5.1. Its price-to-free cash flow and price-to-book are also below industry averages. CRAI has a Quality Grade of B due to solid fundamentals.
Its current ratio of 1.1 indicates it has more than enough liquidity to handle short-term obligations. To access all of CRAI's grades, including Growth, Momentum, Stability, and Sentiment, click here. CRAI is ranked #2 in the A-rated Outsourcing – Management Services industry. For more top stock in this top industry, click here.
Discover Today's Best Value Stocks
This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
If you would like to see more of his best value stock ideas, then click the link below.
IT shares were trading at $326.69 per share on Tuesday morning, up $3.50 (+1.08%). Year-to-date, IT has gained 103.94%, versus a 23.72% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.3 Buy-Rated Stocks in A-Rated Industries appeared first on StockNews.com