Top Stock Picks for Week of August 31, 2026

Stocks our strategists feel are poised to deliver  positive returns are featured now in their top   stock picks of the week. Hey everyone, Brian  Hayes here with Zach's Investment Research and   welcome to our top stock picks of the week. This  week I'm joined by our director of ETF research,   Nina Misra. We've got two exciting picks for  you. So let's jump right into the action.   My top pick is one of the world's largest online  sellers of homegoods. They offer more than 18   million products from over 12,000 suppliers. The  company I'm referring to is Wayfair, ticker symbol   W. So beyond its flagship site, Wayfair also  operates a family of specialty brands including   Josen, Maine, All Modern, and the luxury focused  Paragold with international operations in Canada,   the UK, and Germany. And what's changed is the  business model underneath. Management spent the   past two years aggressively rationalizing costs,  exiting unprofitable geographies and rebuilding   the platform around profitability rather than  growth at any price. The result is a company that   now converts revenue growth into cash. Wayfair has  also been pushing into physical retail with large   format stores. A notable pivot for a business  built online and one that appears to lift both   brand awareness and digital sales in surrounding  markets. Wayfair just delivered its strongest US   growth since the pandemic era and its best free  cash flow since 2020. And it did so while the   housing market, the single biggest driver of home  furnishings demand, remains effectively frozen.   That combination is rare and the market certainly  noticed. Shares closed roughly 30% higher on the   day of the latest earnings report, one of the  largest single session moves for a large cap   retailer this year. So, this is a stock that is  not only highly ranked by our Zach's rank system,   but it's also outperforming the general market  off the spring lows from earlier this year.   only stocks that are in extremely powerful  uptrends are able to make this type of price   move. And these leaders are the types of stocks  that we want to focus on. So that's a bit about   Wayfair's background and services. Let's shift  gears a bit and look at some fundamentals for this   company. Wayfair is part of the Zach Internet  commerce industry group which currently ranks   in the top 41% out of approximately 250  industries. And because it is ranked in   the top half of all Zach's ranked industries,  we expect this group to outperform the market   over the next three to six months. Historical  research studies suggest that approximately   half of a stock's price appreciation is due  to its industry grouping. In fact, the top   50% of Zach's ranked industries outperforms the  bottom 50% by a factor of more than 2 to one. By   focusing on stocks within the top 50% of Zach's  ranked industries, we can dramatically improve   our stock picking success. And take note here of  the favorable characteristics for this industry   group. We can see that the industries group has  been improving its positioning with a positive   earnings outlook for its constituent companies. In  aggregate, stocks in this industry are relatively   undervalued and are expected to experience above  average earnings growth, signaling a powerful   combination that should lead to higher prices in  the future. And moving to our snapshot page here,   we can see that Wayfair is a Zach ranked number  one strong buy stock. What really stands out is   the company's ability to deliver positive earnings  surprises. They've surpassed estimates in each of   the last six quarters and they've delivered a  trailing four quarter average earning surprise   of nearly 22% reflecting strong execution. This  track record aligns perfectly with the power of   the Zach rank system which prioritizes stocks  showing upward earnings estimate revisions.   And as I mentioned earlier, the company's second  quarter results were emphatic. Total net revenue   rose 7.5% to 3.52 billion, surpassing the  Zach's consensus estimate by 1% 1.5% while   adjusted earnings of 95 cents per share also  topped the 94% consensus estimate by about 1%.   US net revenue climbed 8.7% to 3.1 billion which  was the strongest domestic growth of the entire   postcoid period. Free cash flow hit 301 million  the highest since 2020 and the balance sheet   ended the quarter with 1.1 billion in cash and  short-term investments along with 1.6 billion   of total liquidity. Management's commentary was  equally constructive. CEO Niraj Sha pointed to the   best sequential second quarter growth since 2020  and noteworthy outperformance at Paragold. While   CEO CFO Kate Golver said plainly that Wayfair  is taking share from traditional brickandmortar   competitors while the housing market remains  stalled. For the fourth for the third quarter, the   company got it to high singledigit revenue growth  against a street looking for roughly 5% with   gross margin of 29.5% to 30.5% and the estimate  picture reflects all of this. The Zach's consensus   estimate for the current fiscal year has been  raised 6.79% in the last 60 days to 2.99 $2.99   cents per share. That is the kind of revision  momentum that drives the Zach's rank. And let's   see how that compares. So that $2.99 per share  reflects nearly 15% growth relative to the prior   year. So these are exactly the types of trends we  want to focus on when narrowing down our list of   potential stocks. Wayfair has transi transitioned  from a falling knife look in early 2026 to one of   the better recovery stories in the market today  after bottoming near $56 a share. the stock has   nearly doubled, sitting near $100 a share, not far  from a 52- week high. So, this is exactly the kind   of stock we want to include on our portfolio, one  that is uh trending well and receiving positive   earnings estimate revisions. Notice how shares now  reside above upward sloping 50-day moving average,   a hallmark of a healthy uptrend. The momentum has  clearly built throughout 2026 with both improving   fundamentals and a constructive technical  picture. Wayfairo appears poised to continue   its outperformance. It's clear that this stock  is a leader in the current market environment.   So Wayfair, ticker symbol W, is my top pick of the  week. A company growing share while its end market   shrinks is a company with genuine competitive  advantage. And when housing does eventually turn,   Wayfair will have that tailwind on top of  the share gains it is banking now. I see   more upside ahead for this stock. Next up, Nina  will share with you her other top pick. Thanks,   Brian. I'm Nina Mishra and my top stock pick today  is Caterpillar, a Zach's rank number one strong   rated stock, ticker symbol CAT, C A T. So, we all  know about Caterpillar. Let me talk a little bit   more about Caterpillar. Let me share my screen.  So Caterpillar as we know is known for its iconic   yellow machines and it is the world's largest  construction and mining equipment manufacturer   and now it has become a major player in the AI  boom because we know that uh all these technology   companies they are building these massive AI data  centers and caterpillars, generators and power   system. They provide electricity and backup power  for these massive AI data center that are really   power hungry. Now the company reported excellent  results recently. Uh it was their best quarter   ever in company's history. So second quarter  sales surged 24% to 25 20.5 billion and uh this   was for the first time ever that revenues uh uh  topped 20 billion. Then adjusted earnings were up   73% yearoveryear and they beat the Zach consensus  estimate by more than 30%. The company also raised   its full year outlook after that record quarter.  Now let me share the Zach's code page and uh let's   go to the detailed earnings tab and you will see  that analysts have raised their estimates for the   current quarter and the next quarter significantly  after those results. And that is one of the main   reasons why the stock has climbed to Zach's rank  number one strong buy. Looking at the longer term   price consensus and estimates uh EPS surprise uh  chart you will see that company has been topping   estimates for the last four quarters and the  price has just gone vertical during this period.   Now let's talk a little bit more about the company  and its results. So the order backlog that reached   a record 72 billion at the end of the second  quarter that was up 92% yearoveryear. So that   uh suggest suggested that uh customers are  placing orders years in advance. uh that   provides the company predictable and guaranteed  income for years to come, a very strong revenue   uh visibility. Um the main reason is uh every  machine that Caterpillar sells eventually needs   replacement parts, maintenance and software  updates. So this continuous maintenance creates   steady recurring revenue that earns higher profit  margin than selling the equipment itself. And   uh then governments are also spending a  lot in on infrastructure. So that supports   uh the demand for caterpillars heavy equipment  particularly uh you know there's high demand   for mind metals like copper for electrics  grids and uh technology and another reason   why I like caterpillar is that uh because it is  a dividend aristic trap. So Caterpillar has paid   a cash dividend every year since the company was  founded and it has been raising its dividend for   more than 25 years. So that is why it is in the d  dividend aristocrat index and recently also they   raised their quarterly dividend by 8%. So very  strong cash flows and that is why they have been   uh raising their dividends year after year and  because it's a Zach's rank number one stock.   So it is definitely worth a look. Thanks for  watching. Make sure to check out zach.com/promo   for an interesting offer. Make sure to subscribe  to our YouTube video channel so that you do not   miss anything. And we will see you next week  with two more very interesting top stock picks.