Zacks Independent Research Reports
Our firm has long believed that that quantitative models (like the Zacks Rank) can predict stock prices more accurately than individual analysts. However we also recognize that models are most effective when they are employed by analysts who have deep fundamental knowledge of the company and its industry. Consequently, Zacks Equity Research combines Zacks quantitative models with the insight provided by experienced equity analysts to create superior long term stock recommendations.
In 1978, Len Zacks hit upon a key discovery: earnings estimate revisions are the most powerful force impacting stock prices. With this crucial finding, he developed the Zacks Rank to harness the power of earnings estimates. The average yearly gain for Zacks Rank #1 (Strong Buy) stocks is +26% per year. These returns cover a period from 1988-2015 and were examined and attested by Baker Tilly Virchow Krause, LLP, an independent accounting firm.
Zacks now produces a Zacks Rank for equities, mutual funds and ETFs.
Zacks Rank for Equities
For equities, the Zacks Rank uses four factors related to earnings estimates to classify stocks into five groups, ranging from Strong Buy to Strong Sell. More importantly, it allows individual investors to take advantage of trends in earnings estimate revisions, and benefit from the power of institutional investors. The four factors used in the Zacks Rank for Equities are the extent to which all brokerage analysts are revising their earnings estimates in the same direction, the size of the recent change in the current consensus estimate for the fiscal year and the next fiscal year, the difference between the most accurate estimate as calculated by Zacks and the consensus estimate, and the last few quarters’ earnings per share (EPS) surprise. Each one of these components is combined into a composite score and is recalculated every night. These scores are then compiled into the Zacks Rank and are made available to investors every day.
Zacks Ranks for Mutual Funds
For mutual funds, the Zacks Mutual Fund Rank is a rating system that will help investors find the best mutual funds to outperform the market. It is not just focused on past performance, but the likely future success of the fund. It works like our proven Zacks Rank for stocks-funds are ranked on a scale from #1 (Strong Buy) to #5 (Strong Sell). Each month, we update the Zacks Mutual Fund Rank based on an exclusive process created by the Zacks Quantitative Research Department.
We have two different fund systems to create the best mutual fund ratings. One system is exclusively applied to U.S. stock-based mutual funds where we evaluate the average Zacks Rank for the stocks owned by the fund, while blending this with other criteria that our studies show are beneficial in finding funds that will outperform in the future. With the second mutual fund ranking system, we have isolated a number of key factors that will help find funds that will outperform.
Zacks ETF Rank
There are two primary components to the Zacks ETF Rank, Zacks Forecasts for Future Asset Class Returns and the Expected Performance of the ETF Relative to its Industry/Asset Class. Our quantitative models estimate the future performance of the individual ETFs relative to their industry/style box/asset class using past performance data. Other factors used in the Zacks ETF Rank include the Expense Ratio, the Bid-Ask Ratio, the fund’s Momentum (3 month price change velocity), the Duration (bond value sensitivity to interest rate changes) of bond holdings, Bond Credit Ratings, Dividend/Coupon Yields, and analysis of ETF Holdings.
Each ETF is assigned a score for each of the above factors and then total score is arrived at by adding the weighted scores of all factors, using the factor weights assigned by our proprietary ranking model. Total score is used to assign rating from #1 through #5 within an asset class. The Zacks ETF Rank and Risk ratings have a time horizon of 6 months. However, we continually assess the ranks and ratings and update them every quarter.
With leveraged and inverse ETFs, we believe that they are short term trading vehicles suitable for sophisticated investors only. Given the complexities of these instruments, investors need to be extra cautious in considering them for anything other short-term tactical reasons. We do not rank these securities.
Company Research Reports
Zacks produces research reports for over 4000 companies. Some are in-depth Analyst reports and some are 1-page Snapshot reports. What’s the difference? Learn more here.
Zacks Analyst reports contain several standardized sections: an Outlook and Stats Summary, Overview section, Reasons to Buy, Risk Summary, Recent News Discussion, Valuation, and Key Indicators. These reports provide an in-depth analysis of the strengths and weaknesses of the company, its position within its industry, and its outlook for future investment performance.
Broker Research Digest Reports
Separately from our own research reports, Zacks analysts work on behalf of our institutional clients to review research reports published by Wall Street analysts and summarize them in a single Broker Digest Report. The Digest reports summarize the prevailing views, both pros and cons, on each of about 600 stocks followed by our institutional clients. These Broker Digest Reports are now available for retail investors too.
Zacks Research Resources
All the articles, recommendations and reports from Zacks Equity Research can be found at the Zacks Equity Research Homepage. Be sure to bookmark this page for future reference.
Sample research reports can be found at the Sample Reports link at the top left of this page, or click here.