As a stock picker and blogger, Ryan McQueeney is currently ranked 13th out of the 6,524 financial bloggers tracked by TipRanks.com. His 448 buy recommendations were on the mark 67 per cent of the time and have an average gain of 16.7 per cent in the year after recommendation. Mr. McQueeney works at Zacks Investment Research.
How are you able to perform so well as a stock picker?
I work for an independent investment research firm and as a result, have learned a lot about stocks. One thing I’ve found useful, in particular, is screening for companies on the basis of trends in their earnings estimates and revisions. Simply put, it is a positive sign if a company is exceeding consensus forecasts for its earnings, and analysts are revising their earnings estimates upward.
From there, I look for stocks that fit in with my macro view of the market, which I try to formulate based on national and international events, economic figures. I also look at stocks that fit in with my personal interests – for instance, the technology industry. A focus on this sector has been fruitful because technology stocks have been among the market’s strongest over the past year or so.
Are there studies that show investors can outperform by buying stocks on the basis of trends in earnings surprises and revisions?
There is a section on the Zacks website that shows this, using the independently audited returns they have achieved over the last three decades. You have to click on the Education tab at the top. [The section says a portfolio of stocks deemed strong buys – No. 1 rank – by Zacks’ model has “beaten the market in 25 of the last 30 years with an average return of 25.3 per cent a year, more than double the S&P 500’s 10.7 per cent.”]
Can you tell us about some of your recent stock picks?
One is BlackBerry Ltd. It has managed to surpass earnings-per-share estimates for nine consecutive quarters, so CEO John Chen’s strategy of shifting from smartphones to enterprise software and services appears to be working. A few months ago, Mr. Chen entered into a contract with BlackBerry that grants him large cash and stock bonuses if the company’s share price goes to higher levels.
I have also become bullish on the artificial-intelligence market, which is expected to grow to US$57.6-billion by 2021, up 380 per cent from 2017. Companies are just beginning to harness the power of data via machines learning and improving on their own. Talked to your phone’s virtual assistant or asked your smart speaker a question lately? You did so with the help of AI platforms.
A nice play in this space is Nvidia Corp., which has made a habit of crushing earnings expectations and is consequently a strong buy. Its industry-leading GPUs [graphics processing units] have been the No. 1 choice for PC gamers worldwide. But now, Nvidia is becoming an industry leader in the emerging AI market, with its high-end GPUs being increasingly used in supercomputers and massive data-centres where machine-learning programs are finding greater application.
Other companies with AI exposure include Tableau Software Inc., which specializes in visualization products used in business intelligence tools; Varonis Systems Ltd., a big data-security firm; and HubSpot Inc., a leader in the fields of social media, content management, web analytics and [search engine optimization]. On the robotics side, there are pioneers like drone-maker AeroVironment Inc. and home-automation giant iRobot Corp.
Will the bull market continue?
A trade war seems to be brewing, which has weighed on the market. But the U.S. economy, which is the engine driving the global economy forward, is still in the Goldilocks phase, with a strong labour market and low inflation. Profit growth for companies has been remarkable and should continue for a while yet, based on the economic fundamentals. Some of the recent growth in earnings may reflect tax cuts but revenue growth has been strong too, and that is a good sign.
This interview has been edited and condensed.
Larry MacDonald is an economist, author and financial writer.