- (0:30) - Understanding The Zacks Ranking System
- (3:45) - The Impact of Mixed Earnings Revisions
- (9:30 - Breaking Down Growth Stocks With a Zacks Rank of 4 & 5
- (17:45) - The Mysterious Drop To Zacks Rank #4
- (22:00) - How Should The Industry Rank Be Used?
- (30:00) - Episode Roundup: JPM, BAC, YY, BABA, LVS
Learn the good, and the bad, about Zacks stock ranking system including when it works best and how you can maximize it for your own investing.
Welcome to Episode #164 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is joined by Sheraz Mian, Director of Research at Zacks, to discuss the secrets of the Zacks Rank.
Why would you use the Zacks Rank? Is it good for traders and investors?
Why does a stock change from a Buy to a Hold overnight?
And what about the Industry Rank? Does it work the same as the Zacks Rank? Can I actually trade it?
Keys to the Zacks Rank
The Zacks Rank looks at the earnings outlook. It does not take into account stock price or fundamentals like P/E. It is simply based on earnings.
It has four components: magnitude, agreement, upside and surprise.
The Rank can change daily.
The Zacks Rank correctly forecasts movements of the stock 55-56% of the time. Obviously, it fails the rest of the time. All investors should know the strengths, and weaknesses, of any stock system.
Big Banks in Action
Recently, the big banks reported earnings so the analysts have been adjusting estimates. This is the prime time, just after an earnings report, when the Rank will change.
Bank of America BAC and JP Morgan JPM have both had estimate revisions yet Bank of America has jumped to a Rank #2 (Buy) while JP Morgan remains a Rank #3 (Hold).
Why the difference even though both have had estimate revisions?
Learn what goes into the Rank.
Why Are the Chinese Stocks Sells?
At the end of 2018, many Chinese stocks had Zacks Ranks of #4 (Sell) or #5 (Strong Sell).
For example, YY YY was a Zacks Rank #5 (Strong Sell) while Alibaba BABA was a Rank #4 (Sell).
Is there something special with foreign companies and the Rank?
To understand the Rank, which is a short-term recommendation of 1-3 months, you need to look at the full year earnings estimates on both companies.
What do those estimates tell us?
Volatility Just Before an Earnings Report
Have you owned a company that is about to report earnings that has suddenly dropped to a Rank #4 (Sell)?
Las Vegas Sands LVS reports soon and is now a #4 (Sell).
Why does the Rank seem to get volatile just before an earnings report?
Find out the answer to this question and more secrets about the Zacks Rank, and the Industry Rank too, on this week’s podcast.
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