Hey Abbott! A New Opportunity for Investors in Abbott Labs
If there is one theme that runs throughout all of our thinking when it comes to investing with PowerRatings, then that theme might be: the right stocks at the right time from the right places.
What are the right stocks? The right stocks are stocks with, among other things, steady growth in revenues and earnings. On any given day, any stock can find itself rocketing higher. Maybe for good reasons. Maybe not. But the question is: will this stock still be moving higher one week, one month, or one year from now?
What is the right time? We believe in buying weakness and selling strength. This might seem like an investing cliché, along the lines of “buying low and selling high.” But before you write the idea off as obvious, ask yourself: as an investor, how many times have I bought a stock AFTER it made a big move, hoping that the stock would make an even BIGGER move after I bought it?
What are the right places? The right places are industries that investors favor–big, institutional investors like mutual funds, pension funds and hedge funds. These industries change as the times change, as the economy or monetary policy shifts to advantage one industry at the expense of another. And it is true that a good stock is a good stock is a good stock. But the wind behind the wings of a stock that is in a strong industry, an industry with companies that provide goods and services that are in high demand, is a powerful wind, indeed. All things considered, we want both a good stock AND a good industry.
Fortunately, finding good stocks in good industries is a lot easier using PowerRatings–especially our PowerRatings
Advanced Screener. By setting the parameters to find stocks with an “in the green”, 8, 9, or 10 PowerRating that are ALSO in an industry with a PowerRating of 7 or higher, investors can gain a powerful edge over both the market and the average stock.
One such company is Abbott Labs [ABT@ABT]. I actually discovered Abbott Labs not through the PowerRatings Advanced Screener, but through the Today’s
PowerRatings Upgrades page, which lists stocks that have increased in PowerRating since the previous close. Abbott Labs climbed from an “okay” PowerRating of 7 to an “in the green” PowerRating of 8. With this upgrade, Abbott Labs is a stock investors can now consider owning over the months to come.
What is an 8-rated stock? Our research going back to 1995 tells us that stocks with 8 PowerRatings have been higher one year later more than 74% of the time. 8-rated stocks also have returned on average 17.13% after a year. This performance is more than 100 basis points better than what 7-rated stocks have produced, and more than 400 basis points better than what the average stock has gained in a year’s time.
Abbott Labs is involved in the design, development and manufacturing of a number of different health care products. The company is divided into four divisions, focusing on pharmaceutical, diagnostic, nutritional and vascular products. The company is a member of the Drug Manufacturers-Major industry, an industry with a PowerRating of 7, which includes stocks such as Johnson & Johnson [JNJ@JNJ], Eli Lilly [LLY@LLY], and Merck [MRK@MRK].
Industries with a PowerRating of 7 have dramatically outperformed the average industry according our research. 7-rated industries have returned, on average, an annualized 18.02% since 1995. Compare this to the performance of the average industry, which has provided an average annualized return of 14.61%.
David Penn is Senior Editor of PowerRatings.net.