Welcome to Episode #397 of the Value Investor Podcast.

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

A podcast listener recently wrote in asking how to use the Zacks Rank, which is a short-term recommendation of 1 to 3 months, to find long-term value.

Good question.

Most value investors are long-term investors. They aren’t traders. Value investing entails buying a stock the Street is ignoring.

Usually no one wants that stock which is why it has become so “cheap.” But a cheap stock can remain cheap for a long time. Value investors know they must be patient and wait for the market to realize that there is value in the company.

That can mean owning a stock for a long period.

Using the Zacks Rank to Find Value Stocks

But that could be a problem if you’re using the Zacks Rank to guide your investing. The Zacks Rank is a powerful tool which ranks over 4,000 companies in a range from Strong Buy down to Strong Sell.

Sounds easy.

But, the Rank is a short term recommendation of just 1 to 3 months. That’s because the Rank is based on changes to analyst earnings estimates, which tend to change all the time.

The Zacks Rank is a great tool for finding hidden gems and cheap value stocks. But, it loses its punch if you own the stock for years.

What should long-term investors do?

Tracey explains her Zacks Rank strategies and secrets in this week’s podcast.

Using the Zacks Rank on 5 Stocks

1.      Cal-Maine Foods, Inc. (CALM Quick QuoteCALM - Free Report)

Cal-Maine Foods is the largest producer of eggs in the United States. It’s also a Zacks Rank #1 (Strong Buy).

1 estimate is higher in the last 30 days for fiscal 2025. The fiscal 2025 Zacks Consensus Estimate has jumped to $15.59 from $8.54 as the price of eggs has soared the last few months. Cal-Maine Foods has expected earnings growth this year of 174%.

Cal-Maine Foods is cheap with a forward price-to-earnings (P/E) ratio of 5.7.

What is the Zacks Rank telling us about long-term investing in Cal-Maine Foods?

2.      PulteGroup, Inc. (PHM Quick QuotePHM - Free Report)

PulteGroup is the largest publicly traded homebuilder in the United States. When the podcast was recorded, Pulte was a Zacks Rank #5 (Strong Sell) but is now a #4 (Sell) stock.

5 estimates have been cut, and one raised, in the last 30 days. The 2025 Zacks Consensus Estimate is now looking for $12.32, down from $13.34 30 days ago. That is an earnings decline of 16.1% from 2024.

PulteGroup is cheap, with a forward P/E of 8.4.

What is the Zacks Rank telling us about long-term investing in PulteGroup?

3.      Toll Brothers, Inc. (TOL Quick QuoteTOL - Free Report)

Toll Brothers is a luxury homebuilder. Toll Brothers is a Zacks Rank #4 (Sell) stock. But the entire homebuilder industry has low Zacks Ranks (see above with PulteGroup). As an industry, it ranks in the bottom 3% of all Zacks Ranked industries. That’s 239 out of 246 industries. Analysts are cutting estimates on many of the homebuilders right now.

6 estimates are lower for Toll Brothers over the last 30 days, with 1 being cut in the last week. No estimate revisions were higher during this time. The 2025 Zacks Consensus Estimate has dropped to $13.82 from $14.15 in the last 30 days. Toll Brothers earnings are expected to fall 7.9% year-over-year.

Toll Brothers is still cheap. It trades with a forward P/E of 8.

What is the Zacks Rank telling investors about Toll Brothers and the entire homebuilding industry right now?

4.      Builders FirstSource, Inc. (BLDR Quick QuoteBLDR - Free Report)

Builders FirstSource operates retail stores for construction and building professionals across the United States. Since the Federal Reserve began raising rates in 2022, business has been tough. It looks like there may not be a recovery in 2025. Builders FirstSource is a Zacks Rank #5 (Strong Sell) as analysts cut 2025 earnings estimates.

6 earnings estimates have been revised lower in the last 30 days for 2025 with 3 lowered in the last week. The Zacks Consensus Estimate has fallen to $9.82 from $11.88 during the last month. That is a 15% decline year-over-year.

Builders FirstSource is still cheap. It trades with a forward P/E of 14.2.

What does the Zacks Rank tell us about longer-term investing in Builders FirstSource?

5.      Pool Corp. (POOL Quick QuotePOOL - Free Report)

Pool Corp. was a big winner during the pandemic as everyone focused on buying things for their homes, including pools. But in 2022 when the Federal Reserve raised interest rates, loans to buy pools got more expensive too. Pool Corp. is a Zacks Rank #4 (Sell) stock.

6 estimates have been cut for 2025 in the last 30 days with 2 cut in just the last week. None have been raised in that time. It has pushed down the Zacks Consensus to $11.49 from $11.91. That is still earnings growth of 3.8% as Pool Corp made $11.07 last year.

Pool Corp. is not cheap though. It trades with a forward P/E of 29.8.

What does the Zacks Rank tell us about longer-term investing in Pool Corp.?

What Else Should You Know About Using the Zacks Rank for Long-Term Investing?   

Tune into this week’s podcast to find out.

[In full disclosure, Tracey owns shares of TOL, BLDR and PHM in Zacks Value Investor portfolio and TOL and BLDR in her personal portfolio.]