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In brief, Zacks “fair value” earnings call is based on a 2022 forward look ($223); 2023 (another ~10% added to $246.52); and an 18 F12M P/E ratio, a five-year average.
Zacks has 4,900 at year-end (YE) 2022 as our initial, conservative ‘fair value’ target.
Add on a dollop of Fed and G10 central bank-driven valuation upside to that.
The latest 2022 “bottoms-up call is for the S&P 500 to reach 5,318.2 in 12 months.
Without money printing, Zacks has the S&P 500 index 4,900 at YE 2022. Add 320 points of money printing effects to get the S&P 500 index to 5,220 at YE 2022.
Zacks had 4,350 as a YE 2021 call for “fair value” without money printing. The year ended with the S&P500 at 4,770. A difference of ~320 points.
Very bullish top-down Wall Street strategists called for the S&P 500 to end 2020 trading at 3,450. It ended at 3,756. A difference of ~300 points.
In conclusion, to actively compute “fair value” valuations, factor in earnings growth ahead, like the stock market does, 6 to 12 to 18 months.
Always keep up-to-date. Time moves on faster than your last calculation may recognize.
Looking for S&P 500 or Small-Cap Sector and Industry Ideas?
Apply a 12M forward-looking (endemic) COVID earnings landscape.
Study 2022 and the first half of 2023!
Focus on cyclical Zacks S&P 500 sectors.
The top-most large-cap sectors come to life in 2022, as broader and deeper U.S. and global vaccination and booster rates raise mobility, even more.
Consumer Discretionary (+66.0)
Aerospace (+19.1%)
Autos (+16.6%)
Construction (+16.0%)
Industrial Products (+15.4%)
Conglomerates (+12.5%)
Retail/Wholesale (+11.9%)
Medical (+8.7%)
Technology (+7.8%)
Utilities (+6.7%)
Consumer Staples (+5.1%)
Basic Materials (+3.6%)
Finance (-7.3%)
Oil/Energy (na)
An idea? Play sold-off cyclicals on a 2022 EPS/revenue build. That’s a forward bull play.
Zacks S&P 600 (Small Cap) Annual Earnings consensus shows a nifty rise going out to 2023. The small-cap Russell 2000 has sold off, more than the large cap growth indices.
To Jan. 31st, there were 10.08B vaccine doses given, 375.1M world-wide cases and 5.67M deaths worldwide.
In that, there were 74.3M USA cases and 884K USA deaths.
The FEB Zacks Rank system showed only 2 Very Attractive sectors; Energy and Info Tech. Both are global, and both are driven by supply shortages at the moment.
It was sparse one notch beneath that too: Consumer Discretionary got an upgrade to Attractive. The setting is one where Omicron played out. All may bounce a quarter later.
Materials and Industrials came in at Market Weight. Steel and Metal Fabricating looked good. Communication Services and Utilities stayed at Market Weight. Telco Equipment looked great.
Health Care was a bare Market Weight. Why? Omicron raised the Drug Industry and lowered the Medical Products industry at the same time.
Consumer Staples fell all the way back to Very Unattractive this month. Agri-business was the exception. Omicron took down Misc. Staples, Tobacco, Food, & Beverages.
(1) Info Tech stayed at Very Attractive. Computer-Office Equipment, Semis (with a global supply shortage), and Misc. Tech were at the top, and in that order.
(3) Consumer Discretionary rose to Attractive. Publishing, Apparel and Autos/Tires/Trucks, were strong and show wealth effects and strong overall consumer spending.
(4) Financials fell to Market Weight. Investment Banking, and Banks & Thrifts looked good again. Higher rates ahead, more profit from the U.S. stock boom and its related M&A deals.
(5) Industrials fell to Market Weight. Metal Fabricating and Pollution Control (Biden infrastructure?) were the 2 clear top industries.
(6) Materials stayed at Market Weight. Steel and Paper were the obvious top industries.
(7) Health Care stayed at Market Weight. Omicron: Drugs rose. Medical Products took a hit.
(8) Utilities stayed at Market Weight. Utilities-Electric Power was best. Winter.
(10) Consumer Staples fell to Very Unattractive. Agri-business (commodity price boom) was the sole outperformer. Food, Beverages and Food/Drug Retail, and Misc. Staples took a COVID hit.
Conclusion
The S&P 500 was trading at 4,477 when I wrote this on Feb. 3rd, 2022.
My S&P 500 year-end 2021 call of 4,3450 (plus a month’s time in 2022) is looking fairly useful.
Keep that in mind.
“Fair Value” will keep your feet on the ground, and building cash, when valuations soar.
And “Fair Value” can get your oars dipping in the waters of the coming year’s stock market, and buying at the right time, when valuations pull back.
I hope you enjoy this month’s Zacks Market Strategy Report.
Warm Regards,
John Blank
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What's the S&P 500's 'Fair Value'? Zacks FEB 2022 Market Strategy
The following is an excerpt from Zacks Chief Strategist John Blank’s full Feb Market Strategy report To access the full PDF, click here.
In brief, Zacks “fair value” earnings call is based on a 2022 forward look ($223); 2023 (another ~10% added to $246.52); and an 18 F12M P/E ratio, a five-year average.
Zacks has 4,900 at year-end (YE) 2022 as our initial, conservative ‘fair value’ target.
Add on a dollop of Fed and G10 central bank-driven valuation upside to that.
The latest 2022 “bottoms-up call is for the S&P 500 to reach 5,318.2 in 12 months.
Without money printing, Zacks has the S&P 500 index 4,900 at YE 2022. Add 320 points of money printing effects to get the S&P 500 index to 5,220 at YE 2022.
Zacks had 4,350 as a YE 2021 call for “fair value” without money printing. The year ended with the S&P500 at 4,770. A difference of ~320 points.
Very bullish top-down Wall Street strategists called for the S&P 500 to end 2020 trading at 3,450. It ended at 3,756. A difference of ~300 points.
In conclusion, to actively compute “fair value” valuations, factor in earnings growth ahead, like the stock market does, 6 to 12 to 18 months.
Always keep up-to-date. Time moves on faster than your last calculation may recognize.
Looking for S&P 500 or Small-Cap Sector and Industry Ideas?
Apply a 12M forward-looking (endemic) COVID earnings landscape.
Study 2022 and the first half of 2023!
Focus on cyclical Zacks S&P 500 sectors.
The top-most large-cap sectors come to life in 2022, as broader and deeper U.S. and global vaccination and booster rates raise mobility, even more.
An idea? Play sold-off cyclicals on a 2022 EPS/revenue build. That’s a forward bull play.
Zacks S&P 600 (Small Cap) Annual Earnings consensus shows a nifty rise going out to 2023. The small-cap Russell 2000 has sold off, more than the large cap growth indices.
2011 $29.1 Billion
2012 $32.2
2013 $36.5
2014 $39.1
2015 $36.8
2016 $37.5
2017 $40.4
2018 $50.0
2019 $48.0
2020 $33.8
2021 $65.5
2022 $72.7
2023 $79.7
Still: realize this pandemic is not over.
Far from it.
To Jan. 31st, there were 10.08B vaccine doses given, 375.1M world-wide cases and 5.67M deaths worldwide.
In that, there were 74.3M USA cases and 884K USA deaths.
The FEB Zacks Rank system showed only 2 Very Attractive sectors; Energy and Info Tech. Both are global, and both are driven by supply shortages at the moment.
It was sparse one notch beneath that too: Consumer Discretionary got an upgrade to Attractive. The setting is one where Omicron played out. All may bounce a quarter later.
Materials and Industrials came in at Market Weight. Steel and Metal Fabricating looked good. Communication Services and Utilities stayed at Market Weight. Telco Equipment looked great.
Health Care was a bare Market Weight. Why? Omicron raised the Drug Industry and lowered the Medical Products industry at the same time.
Consumer Staples fell all the way back to Very Unattractive this month. Agri-business was the exception. Omicron took down Misc. Staples, Tobacco, Food, & Beverages.
(1) Info Tech stayed at Very Attractive. Computer-Office Equipment, Semis (with a global supply shortage), and Misc. Tech were at the top, and in that order.
Zacks #1 Rank (STRONG BUY): STMicroelectronics (STM - Free Report)
(2) Energy remained a Very Attractive sector. Coal, Oil & Gas Integrated, Oil-Misc. and the Energy-Alternates stood out.
Zacks #1 Rank (STRONG BUY): BP (BP - Free Report)
(3) Consumer Discretionary rose to Attractive. Publishing, Apparel and Autos/Tires/Trucks, were strong and show wealth effects and strong overall consumer spending.
Zacks # Rank (STRONG BUY): Asbury Automotive Group (ABG - Free Report)
(4) Financials fell to Market Weight. Investment Banking, and Banks & Thrifts looked good again. Higher rates ahead, more profit from the U.S. stock boom and its related M&A deals.
(5) Industrials fell to Market Weight. Metal Fabricating and Pollution Control (Biden infrastructure?) were the 2 clear top industries.
(6) Materials stayed at Market Weight. Steel and Paper were the obvious top industries.
(7) Health Care stayed at Market Weight. Omicron: Drugs rose. Medical Products took a hit.
(8) Utilities stayed at Market Weight. Utilities-Electric Power was best. Winter.
(9) Communications Services stayed at Market Weight. Telco Equipment looked great.
(10) Consumer Staples fell to Very Unattractive. Agri-business (commodity price boom) was the sole outperformer. Food, Beverages and Food/Drug Retail, and Misc. Staples took a COVID hit.
Conclusion
The S&P 500 was trading at 4,477 when I wrote this on Feb. 3rd, 2022.
My S&P 500 year-end 2021 call of 4,3450 (plus a month’s time in 2022) is looking fairly useful.
Keep that in mind.
“Fair Value” will keep your feet on the ground, and building cash, when valuations soar.
And “Fair Value” can get your oars dipping in the waters of the coming year’s stock market, and buying at the right time, when valuations pull back.
I hope you enjoy this month’s Zacks Market Strategy Report.
Warm Regards,
John Blank