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Zacks Investment Research

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									GUIDE



  Zacks Investment Research, Inc.
111 North Canal Street, Suite 1101
            Chicago Illinois 60606
     www.ZaCkS.Com/gRowthtRadeR
CONTENTS
Introduction .................................................................................................................................. 2


Section 1:

The Mental Aspect ....................................................................................................................... 3


Section 2:

Getting the Most Out of Growth Trader ....................................................................................... 4


Section 3:

Follow the Leader ........................................................................................................................ 5


Section 4:

How to Read Growth Trader Daily Summary .............................................................................. 6


Section 5:

Stock Selection Process .............................................................................................................. 7


Section 6:

Virtues of Money Management .................................................................................................... 9


Section 7:

Tying it All Together .................................................................................................................... 10




                                                                       1
INTRODUCTION
We would like to welcome and congratulate you for joining the Zacks Growth Trader family. You
have made a major step toward achieving excellent returns in your trading. The Zacks Growth
Trader is a short-term (4-12 weeks) trading alert service from Zacks Investment Research that
seeks to produce exceptional results from companies that are outpacing their industry competi-
tion.

We ask that you take the time to read this guide carefully, as it has many tips on how to use
the Growth Trader effectively. This includes managing your expectations, advice on how to get
the most out of using the service, the philosophy behind our stock selection process, and much
more.

The Growth Trader uses a high Zacks Rank and a basket of other key criteria to identify compa-
nies that are growing faster than their industry competition. We also created demanding valuation
metrics that ensure only the best stocks with the most growth potential will clear our screen.

The premise behind the Zacks Rank is that earnings estimate revisions are the most powerful
force impacting stock prices. It is a proprietary, quantitative model that uses four factors related to
earnings estimates to classify stocks into five groups, ranging from “Strong Buy” to “Strong Sell.”
Zacks continually compiles and analyzes research reports issued by approximately 3000 analysts
from 150 brokerage firms.

Many subscribers see our marketing pieces and assume that the 57.2% return for Growth Trader
was accomplished by having a bunch of home run stocks in the portfolio that went up 50%, 100%
and even 200%. In theory, that is one way to get large annual returns. But also it’s the most un-
likely way to achieve that result.

The road to financial success is paved with a series of small gains on short-term trades that over
the course of a year, should add up to significant performance at year’s end.

Again, welcome to the Growth Trader and happy trading!




John Tornatore
Vice-President




                                                  2
1
THE MENTAL ASPECT
It is amazing how much success is related to what goes on between the ears. There are so many
ways to get distracted and to question yourself while trading. You must be in the right frame of
mind and have reasonable expectations if you are going to have the resolve to stick with the
product. Pay attention to the tips in this section carefully as they will get you thinking in the right
direction.

First of all, there will be losing picks. 100% guaranteed. Just because the Growth Trader gener-
ates a compounded return of 57.2% doesn’t mean every single pick will be a winner. We are
extremely confident that over time we will produce substantial returns, but it is important to learn
how to take the losing picks in stride.

COMPOUND YOUR RETURNS

The Growth strategy uses a system that identifies those rare few stocks that are outpacing their
industry competition. Industry leaders in high-growth industries tend to produce exceptional gains.
But how does 11.9% every 12 weeks become 57.2% at the end of the year? Let’s take a look at
the chart below to provide further clarification.

This is what we call the beauty of compounding and how it works to an investor’s advantage. Al-
bert Einstein called compound interest the eighth wonder of the world and this is a prime example.
So don’t get discouraged when you are “only” seeing small gains on each respective trade, be-
cause that is exactly what this product is designed to do.

Month                     Starting Equity 11.9% 3-Month Gain        Ending Equity        Total Profit %
January-March                    $10,000               $1197              $11,197               11.9%
April-June                       $11,197               $1340              $12,537               25.4%
July-September                   $12,537               $1501              $14,039               40.4%
October-December                 $14,039               $1681              $15,720               57.2%

With this kind of strength, Growth stocks have the capacity to produce exceptional returns in a
fairly short time-frame.

The best results from this service can be obtained by following every recommendation with equal
amounts invested in each selection.




                                                  3
2
GETTING THE MOST
OUT OF GROWTH TRADER
It is our job to provide you with timely and profitable stock picks, but there are steps that you can
take to ensure your success with Growth Trader. Here are a few things you can do to get the most
out of the product.

 1. Read this guide carefully

       ■


       ■


       ■
           This guide is your friend. It has valuable information on how to use the product and
           succeed with the assistance of Growth Trader.

           It gives you step-by-step instructions on how to receive alerts and what to do when
           you receive them.

           It has important money management tips.

 2. Have a working email address

       ■   This is necessary to receive trading alerts. Make sure you can access your email in a
           timely fashion because acting on trades is essential to success.

       ■   The Daily Summary email will be sent at 8:00 p.m. EST, which summarizes the posi-
           tions as well as what happened on Wall Street during that trading day

       ■   To ensure optimal delivery of your trading alert emails, follow this link for quick and
           easy instructions: www.zacks.com/help/add.php.

 3. Have an online trading account

       ■   We are not advocating any particular company for this, but ideally lower commissions
           will help you achieve a higher overall return. You will make several trades a month, and
           high commissions can really eat into your profit margin, especially if you have limited
           capital.

 4. Access the site

       ■   To access the site, go to www.zacks.com/growthtrader, and then enter your username
           and password. This will take you to the main page where you can view the portfolio,
           any pending trades and the commentary.




                                                 4
3
FOLLOW THE LEADER
With the Growth Trader, it is better to follow than to lead. It is recommended that you follow each
and every one of the picks to achieve overall success.

The process to receive our trades is very simple, yet we feel it is so important that we are going
to spell it out for you. Here are the four steps:

       ■

       ■

       ■

       ■
           Receive the email with the daily summary

           Read the email to determine if there is a buy signal

           Place a buy order through your broker

           Follow the daily summaries to determine when to sell

Subscribers who realize the highest returns follow the recommendations and those who do the
worst try and cherry pick which buy signals to act on and which to pass on. Follow the signals and
you’ll maximize your opportunity for success.

ACT PROMPTLY = MOST SUCCESS

And if you don’t beat the market, you can take advantage of our 100% Money Back Guarantee.

SPEAKING OF THE GUARANTEE……….

We feel that if we are not able to live up to our word and help you beat the market, then we
shouldn’t be deemed worthy enough to take your money. So in addition to the 90-day, no hassle
guarantee, there is a 100% Money Back Performance Guarantee. There are a few conditions that
have to be met first, but the bottom line is that we have to perform.

A Zacks Growth Trader client may receive a 100% refund of the subscription fees paid during his/
her subscription term if the client’s Zacks stock portfolio underperforms against the S&P 500 dur-
ing the holding period of the stocks. For full information about the details of our guarantee, please
click here.




                                                 5
4
HOW TO READ
GROWTH TRADER DAILY SUMMARY
The Daily Summary provides a wide array of details for the Growth Trader every Monday-Friday.
This summary has the new signals (if any) as well as the current open portfolio with daily com-
mentary. This is valuable information as it conveys what our game plan is, why we are in each
stock, when to get out and why, as well as any relevant news. This is emailed to you at 8:00 p.m.
EST. In regards to the price added for the portfolio, Zacks uses the average of the price at the
open and the closing price on the day the stock is added. Below is an example of what this daily
email and summary will look like:




                                               6
5
STOCK SELECTION PROCESS
Leonard Zacks, holding a PhD in mathematics from MIT, developed his finest work to help inves-
tors beat the market: The Zacks Rank

Through extensive research and testing, Len discovered that:

Earnings estimate revisions are the most powerful force impacting stock prices

This led to a groundbreaking article, published in the Financial Analysts Journal in 1979 and en-
titled “EPS Forecasts - Accuracy Is Not Enough.” From this seminal work was born Zacks Invest-
ment Research and the Zacks Rank.

The Zacks Rank is a quantitative model that uses four factors related to earnings estimates to
classify stocks into five groups, ranging from “Strong Buy” to “Strong Sell”. More importantly, it al-
lows individual investors to take advantage of trends in Earnings Estimate Revisions and benefit
from the power of institutional investors.

The Zacks Rank is calculated from four primary inputs: Agreement, Magnitude, Upside, and Sur-
prise.

Agreement

The extent to which all brokerage analysts are revising their EPS estimates in the same direction.
The more analysts that are revising estimates upward, the higher the Zacks Rank.

Magnitude

The size of recent changes in the consensus estimate for the current fiscal year and the next fiscal
year. For example, an earnings estimate revision that causes the consensus estimate to increase
by 6% is a more powerful signal than an earnings estimate revision that causes a 2% rise in the
consensus estimate.

Upside

This is the difference between the most accurate estimate and the consensus estimate.

Surprise

When the earnings reported in a company’s quarterly or annual report are above or below ana-
lysts’ earnings estimates. A company that reports a positive surprise for the most recent quarter is
more likely to have a positive earnings surprise in the next quarter as well (and vice versa). The
Zacks Rank calculations factor in the last quarter’s EPS surprise.

Every night we recalculate these four factors for the universe of stocks covered by the broker-
age analyst community (approximately 4,400 stocks). The four measures are combined into a
composite score, which is then used to assign a Zacks Rank. We could literally write a book on
the intricacies of the Zacks Rank, but this basic synopsis will suffice for the purposes of Growth
Trader.

For more information on the Zacks Rank go to www.zacks.com/education.




                                                  7
GROWTH TRADER METHODOLOGY

In addition to the Zacks methodology, the Growth Trader strategy seeks to invest/trade in compa-
nies with strong upward earnings estimate revisions as confirmed by their Zacks #1 Rank, which
is a strong buy and is reserved for only the best stocks.

These companies also have to be projecting growth rates better than their Industry’s average –
which means on average, better than their peers and competitors. Focusing on the top tier com-
panies or ‘best of breed’ companies in terms of growth rates helps paint a solid picture moving
forward.

And seeing these stocks responding to their bullish outlooks thru price appreciation further under-
scores the confidence in these stocks and their model for growth.

But we’ve also plugged in some key valuation measures to make sure that the stocks are still sell-
ing at good values. In other words, solid companies, outperforming growth expectations and that
are still attractively priced and valued.

Money follows performance and the Growth Trader was designed to identify those companies
with some of the best performance expectations.

The hold time for the stocks in the portfolio will typically range from 4 to 12 weeks on average and
will only have up to seven stocks, and sometimes fewer depending on market conditions.




                                                 8
6
VIRTUES OF MONEY MANAGEMENT
Money management can be the difference between realizing large gains and going broke, even
if the winning percentage is the same. How can this be? The key point is that winning investors
know to ride their winners and cut their losses quickly, and stick with a plan that has proven to
work in the past.

The backtest of the Growth Trader system showed that these select stocks produced a 57.2%
annual return versus only 2.2% for the S&P 500 (2000 to Q1 2008). This is based off a 12 week
holding period. Here are a few rules that you can follow to further improve your returns:

First of all, don’t dump your entire portfolio into these Growth Trader picks. Only allocate that por-
tion of your capital that can be comfortably devoted to speculation. The Growth Trader portfolio is
a speculative portfolio and one in which your retirement nest egg should not be deployed. In oth-
er words, diversify your portfolio and do not allocate your entire portfolio to the Growth Trader.

This portfolio will only have up to seven stocks, and sometimes fewer depending on market con-
ditions. You should be able to sleep soundly and act rationally if you are only trading with your
speculative money.

Keep in mind that reinvesting profits and the power of compounding are your friends in this port-
folio. Those frequent singles add up to be a homerun in the end when the phenomenon of com-
pound interest works its magic.

EVER-PRESENT CLICHÉ RINGS TRUE

While the Growth Trader has a similar holding period to our other trading service portfolios, it is
still a speculative service with many ideas coming at you per quarter. It has been said millions of
times before, but it is so important it needs to be said again: Don’t put all your eggs in one basket.
Even if you are the most brilliant investor in the world, there will be losing trades. The key is stay-
ing in the game and building your equity over time in a systematic way. This can only be done
when diversification is put to use.

Not that we have to remind you, but the main point is that your capital was earned through years
and years of hard work. Capital conservation sounds boring, but without it, you are fighting a los-
ing battle. We don’t want to see the money you have put your blood, sweat, and tears into evapo-
rate due to lack of discipline.




                                                  9
7
TYING IT ALL TOGETHER
It is our goal at Zacks to enhance your trading results via the Growth Trader service. This booklet
touches upon the details of the service and provides several useful tips to realize the vast poten-
tial that Growth Trader holds. We feel it is our job to let you know that we are here to help you get
the most out of Growth Trader.

Again, let’s go over some of the important points made in this booklet.

       ■

       ■

       ■

       ■

       ■
           Follow Every Single Trade

           Small Gains Add Up To Big Results

           Not Every Trade Will Be A Winner

           Timeliness Is Of The Essence

           Money Management Matters Greatly

       ■   Have A Working Email Address

       ■   We Are Here To Help

The last point is important as we have free customer support that should be taken advantage of.
Any additional questions that you may have can be answered by just picking up the phone and
giving us a call or emailing us:

                                         1.888.775.8348
                                (outside the US, 1.312.265.9239)
                                    growthtrader@zacks.com




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