Take the Zacks Approach to Beat the Markets: StoneCo, Axon, Intuit in Focus

Zacks Research highlights recent stock gains following their upgrades, with StoneCo (STNE) rising 30.9% and BlackBerry (BB) increasing 26.1% after receiving an Outperform recommendation. Despite these successes, a hypothetical portfolio of Zacks Rank #1 stocks underperformed the S&P 500 year-to-date, while the second estimate of Q1 2025 GDP showed a 0.2% contraction, and the Fed's minutes suggest concerns that new tariffs could lead to persistent inflation and curb economic growth.

Analysis

Major U.S. indices, including the Nasdaq Composite (-0.44%), S&P 500 (-0.17%), and Dow Jones Industrial Average (-0.17%), declined during a holiday-shortened trading week, impacted by renewed trade tensions and Federal Reserve concerns that new tariff policies could foster persistent inflation and curtail economic growth. This cautious market sentiment is underscored by the second estimate of Q1 2025 Gross Domestic Product, which shrank at an annual rate of 0.2%, an improvement from the initial 0.3% decline estimate but still the first contraction in three years. Concurrently, the labor market, while resilient, shows signs of weakening, with U.S. jobless aid rising to 240,000 and Continuing Jobless Claims increasing to 1.92 million. Amidst this backdrop, Zacks Research highlights several instances of stock-specific outperformance following its recommendations: StoneCo Ltd. (STNE) surged 30.9% since its Outperform upgrade on April 9 (versus the S&P 500’s 18.7% gain), and BlackBerry Limited (BB) advanced 26.1% since its March 4 upgrade (versus the S&P 500’s 9.6% gain). Axon Enterprise, Inc. (AXON) jumped 42% and Quanta Services, Inc. (PWR) returned 31.9% over the past 12 weeks from the Zacks Focus List, while Intuit Inc. (INTU) rose 22.8% in the same period from the ECAP portfolio; the S&P 500 dipped 0.8% over these 12 weeks. However, the performance of Zacks' broader model portfolios is mixed year-to-date (YTD) in 2025: the Zacks Rank #1 (Strong Buy) stock portfolio returned -8.32% (through May 5) versus -5.35% for the S&P 500, and the Focus List portfolio returned -3.23% (through April 30) versus -4.92% for the S&P 500. In contrast, the defensive ECAP (+3.20% in Q1 2025 vs S&P 500 -4.30%) and ECDP (+5.74% in Q1 2025 vs S&P 500 -2.41%) portfolios showed resilience. Zacks states its recommendations are primarily based on trends in earnings estimate revisions.

Key Decisions for Investors

• Investors should be mindful of the prevailing macroeconomic headwinds, including the Q1 2025 GDP contraction of 0.2% and potential inflationary pressures from trade policies, which contribute to current market uncertainty and recent index declines.
• Consider selectively evaluating individual stocks like STNE, AXON, and BB, which have demonstrated significant recent outperformance following Zacks upgrades, but ensure such selections align with individual risk profiles and investment horizons, recognizing that these successes are highlighted against a challenging broader market.
• Note the mixed short-term performance of some model portfolios; for example, the Zacks Rank #1 portfolio underperformed the S&P 500 year-to-date in 2025, suggesting that a diversified approach and independent due diligence remain crucial rather than solely relying on systematic strategies.
• For those with a lower risk appetite or seeking to mitigate volatility, exploring defensive strategies such as those represented by the Zacks ECAP and ECDP, which reportedly outperformed during the Q1 2025 market pullback, may be a prudent consideration.