Zacks.com featured expert Kevin Matras highlights: Greatbatch, Freescale Semiconductor and Ultra Petroleum Corporation.CHICAGO -- Kevin Matras outlines a strategy for how to trade the Zacks Rank in a very practical manner for almost anyone's portfolio. Stocks in this week's article are: Greatbatch, Inc. (NYSE NYSE See: New York Stock Exchange :GB), Freescale Semiconductor Freescale Semiconductor, Inc. is an American semiconductor manufacturer. It was created by the divestiture of the Semiconductor Products Sector of Motorola in 2004. Freescale focuses their integrated circuit products on the automotive, embedded and communications markets. (NYSE:FSL FSL - Formal Semantics Language. A language for compiler writing. ["A Formal Semantics for Computer Languages and its Application in a Compiler-Compiler", J.A. Feldman, CACM 9(1) (Jan 1966)]. [Sammet 1969, p. 641]. ) and Ultra Petroleum Corp. (NYSE:UPL UPL Unauthorized Practice of Law UPL Upper Payment Limit (Medicaid) UPL Unión del Pueblo Leonés (Spain) UPL Unlicensed Practice of Law UPL Unsecured Personal Loan UPL University Press Limited ). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109 Screen of the Week written by Kevin Matras of Zacks Investment Research Zacks Investment Research A firm that compiles earnings estimates and brokerage firm investment recommendations for thousands of publicly traded firms. : Kevin Matras is sure most everyone reading this knows that the Zacks Rank is probably the most effective rating system out there. Good markets or bad, stocks with a Zacks Rank of #1 continue to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. . In fact, since 1988, the average annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return of Zacks' #1 Ranked stocks is up 32.8% a year. But what Kevin wants to focus on today is how to try and recreate those returns in a practical trading account Trading Account 1. An account similar to a traditional bank account, holding cash and securities, and is administered by an investment dealer. 2. An account held at a financial institution and administered by an investment dealer that the account holder uses to employ a . Since there are typically over 200+ stocks ranked at #1 at any time, it's important to know what other filters to apply to the Zacks Rank to generate a smaller (more tradable) watchlist. Two filters in particular, when added to the Zacks Rank of #1, not only narrows down the number of qualified stocks to a practical portfolio size (approx. 10-12 stocks), it often times increases its performance as well. Parameters The two filters Kevin is talking about are;
-- % Change Q1 Est. over 4 Weeks greater than 0
(Positive current quarter estimate revisions over the last 4
weeks.)
-- % Broker Rating Change over 1 Week greater than 0
(Positive avg. broker rating changes over the last week.)
And of course ...
-- Zacks Rank equal to 1
These two items added to the Zacks #1 Rank, produce powerful results! Results Kevin ran a series of separate tests on the Filtered Zacks Rank strategy over each of the last 3 1/2 years (2002, 2003, 2004 and YTD See Year-to-date. YTD See year to date (YTD). 2005). He rebalanced the portfolio every four weeks and started each run on different start dates so each test would be rebalanced over a different set of four-week periods. (This is done to eliminate coincidence Coincidence is the noteworthy alignment of two or more events or circumstances without obvious causal connection. The word is derived from the Latin co- ("in", "with", "together") and incidere ("to fall on"). and verify robustness.) In 2002, the Zacks #1 Ranked stocks returned just over 1%, with an average portfolio size of approx. 200 stocks. An impressive return when compared to the S&P 500's -22%. But holding onto 200 or so stocks isn't doable for most investors. But when adding the two aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. filters, the portfolio size shrinks to a tradable 10 stocks (on average), and a phenomenal 18.1% return. In 2003, the Zacks #1 list (approx. 200 stocks) did nearly 75% in comparison to the S&P 500's almost 29%. But the filtered Zacks Rank narrowed that list down to only 10 stocks (on average) with a return of over 66%. (And while it's true the filtered Zacks Rank produced a smaller return than the full Zacks Rank (66% vs. 75%), rebalancing Rebalancing The process of realigning the weightings of one's portfolio of assets. Notes: For example, if your portfolio's proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting only 10 stocks a month is far more manageable than 200.) And it was right on track again for 2004. The annualized returns for the Zacks #1 Ranked stocks was up 28.8% with an average portfolio size of 202 stocks. (The S&P was up only 10.9%). But the filtered Zacks #1's annualized returns were up 30.3% with again, only 10 stocks to hold on average. And so far for 2005 (YTD -- thru 10/28/05), the complete list of the Zacks #1 Ranked stocks is showing an average cumulative gross return of 16.8% with an average portfolio size of over 200 stocks. But the Filtered Zacks Rank is up 24%, (over 40% more), but with an average portfolio size of only 10 stocks. (And while both of these numbers are impressive, 10 stocks is way easier to trade than 200.) Here's a few of the stocks that qualified the Filtered Zacks Rank this screen (11/14/05); GB Greatbatch, Inc. FSL Freescale Semiconductor UPL Ultra Petroleum Corp. Get the rest of the stocks on this list and start trading the filtered Zacks Rank in your own account. Remember, the key to successful screening is in discovering those screens that have produced profitable results in the past. And that's exactly what you get with the Research Wizard Instructional help in an application or system development environment that guides the user through a series of multiple choice questions to accomplish a task. For the most part, wizards are more effective than the help menus found in most applications, which often border on the atrocious. stock picking and backtesting program. Click here to learn more. http://at.zacks.com/?id=111 Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. About Screen of the Week Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here http://at.zacks.com/?id=112 About Zacks Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 to compile To translate a program written in a high-level programming language into machine language. See compiler. , analyze, and distribute investment research to both institutional and individual investors. The guiding principle behind Zacks work is the belief that investment experts, such as brokerage analysts and investment newsletter writers, have superior knowledge about how to invest successfully. The goal is to unlock these pros' profitable insights for individual investors hard-pressed to find this valuable information in one source. A free subscription to "Profit from the Pros" weekly e-mail newsletter provides the best way to use these experts' insights for more profitable investing. Register for a free subscription to the Profit from the Pros newsletter at http://at.zacks.com/?id=113 Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates. Disclaimer (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the : Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual to buy or sell any security. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion