Ahead of the Market: The Zacks Method for Spotting Stocks Early – In Any Economy
$11.31
| Author(s) | |
|---|---|
| Format |
|
| Pages |
312 |
| Published Date |
2004 |
In Ahead of the Market, Mitch Zacks shows that analysts actually provide a wealth of market-moving information that can generate exceptional returns if interpreted correctly. The key is to use the research produced by Wall Street analysts the same way the professional money managers do. Pioneered by the firm Zacks Investment Research and based on more than twenty years of intensive analysis, the investment strategies revealed in this book are indeed the same ones used by successful professional investors everywhere.
Author’s Note:
Ahead of the Market provides you with objective, independent advice, a road map to understanding and profiting from the brokerage research that is now readily available.The advice I detail in this book is based on roughly twenty years of painstaking quantitative research and analysis combined with my practical experience implementing the strategies described. Unlike other investment book authors, I am not going to talk in vague generalities or give you war stories about stocks I have purchased that have doubled in price. Instead, each chapter of Ahead of the Market provides you with actionable advice based on extensive statistical analysis concerning the historical reaction of stocks to analyst activity.
This book is not a history book. It is not a piece of journalism explaining what has gone wrong with the markets. It is not a biography. Rather, this book is about how you can effectively use analyst research to make money. Ultimately, Ahead of the Market is designed to be a handbook for interpreting and profiting from analyst research. The central point of this book is that a single analyst’s recommendation and earnings estimates, in and of themselves, are useless.What is important is the following:
- What all the analysts say about a given stock
- How those views change over time
When you combine the two you have what has proven to be one of the best ways of finding stocks that will outperform the market.
What Will You Learn in this Book ?
The most profitable uses of the research produced by Wall Street research analysts are not widely known. Instead, most individual investors continue to focus on the elements of the research produced by Wall Street analysts that are the most misleading, and so by definition the most useless. By the end of this book you should know the following:
- Why analysts’ earnings estimate revisions occur incrementally over time and how you can profit from this phenomenon
- How you can avoid being misled by analysts’ buy/hold/sell recommendations
- How you can employ the methodologies used by several large hedge fund managers to predict earnings surprises
- How to avoid being overwhelmed by the amount of stock recommendation data available online and in the financial media by instead focusing on the important analyst-related data that you can use to make a profit
For example:
- You will learn whether you should buy a stock after the stock’s price has dramatically reacted to an analyst’s recommendation upgrade. Is it too late, or do even more significant moves follow?
- Similarly, you will learn whether you should buy a company’s stock after the company reports earnings worse than analysts’ expectations. Is the stock likely to bounce, or sink further?
- And more importantly, you will find out if you should even look at brokerage firm recommendations, or if analyst research contains a more powerful piece of information that can help you make money.
Contents:
- The Main Themes
- How the Analyst Got His Bias
- Dissecting the Analyst’s Report
- The Importance of Earnings and Earnings Estimate Revisions
- How to Use Earnings Estimates to Pick Stocks Profitably
- The Earnings Surprise
- Using the Earnings Surprise in Your Investment Process
- It All Comes Together—The Zacks Rank: The Key to Successful Investing
- Effectively Implementing the Zacks Rank
- How to Effectively Use Analysts’ Recommendations
- Analyst Neglect and Long-Term Earnings Growth Estimates
- Valuation, Earnings Uncertainty, and the Fed Model
Ahead of the Market: The Zacks Method for Spotting Stocks Early - In Any Economy By Mitch Zacks pdf
21 reviews for Ahead of the Market: The Zacks Method for Spotting Stocks Early – In Any Economy
Clear filtersOnly logged in customers who have purchased this product may leave a review.
Sebastian Webster (verified owner) –
I have a number of brokerage accounts at both full service and discount firms and am continually sent reserach reports . After reading this book I finially understand how to use these reports . I have begun to ignore the brokerage firm recommendations and to look very closely at the changes the analyst make in their earnings estimates. This book provides the clearest overview of what Wall Street is doing to investors that I have ever seen . My advice to anyone who now reads eserach reports is to – stop – read this book – and you will never read reasearch in the same way again
Navy Winters (verified owner) –
The path to superior returns in the stock market is to anticipate changes in investor expectations. The multi-million question is how to do that.
An investor needs to realize the market is made up of 2 broad groups: retail investors (little guys like you and me) and big insitutions (mutual funds, insurance companies, hedge funds, etc.).
Big institutions drive market movements. The people responsible for these market movements have the same professional training, and tend to think alike. They focus primarily on reports provided by the analysts at major brokerages.
Many novice retail investors look at an analyst recommendation and mistakenly believe it is profitable to act on it. This book demonstrates why this is the way to the poorhouse.
Even though analyst recommendations are worthless, analysts do provide very profitable info–if you know how to use it. If you look for changes in earnings estimates (upward or downward), you will be able to profitably anticipate the actions of the big guys–who typically chase after earnings momentum. A positive revision will typically send the stock higher for 1-3 months, making such stocks profitable long candidates for shorter-term traders. Likewise, negative earnings revisions are good short candidates.
Incorporate this fundamental framework with preferred technical screening, trade entry, and exit criteria, and you can develop a very reliable and profitable trading system regardless of market direction.
The book will also educate you on the pressures analysts are under to remain positive about a stock despite the fact fundamentals suggest the company is a poor investment. The situation will not change, despite government action to correct it, since there really isn’t any incentive for major brokerage analysts to be honest. They have much more to lose than to gain by issuing more sell recommendations. The stock buyer should beware.
Maxwell Cruz (verified owner) –
Good expose of analyst’s trade and inherent biases, especially in the bull 90’s. However, with regulation FD, and the frequent trading of Zack’s system, it is unlikely to be very profitable going forward.
I was also dissappointed that the author not so subtly points the reader to the Zack’s online pay service ranking system. He essentially builds the case for why you should sign up. Furthermore, the writing style and syntax was simple and dry, not up to the author’s Ivy pedegree. Likely intended for the mass-audience.
Cain Howell (verified owner) –
I found this book very helpful in outlining the importance of research & of tracking earnings estimates. Mitch Zacks gives a good overview of what the key factors are in determining whether a stock will perform. The Zacks Rank was also interesting as it looks like it has performed very well over the past years…It seems as if the Zacks Rank really is accurate, and more imporartantly a successful investing method…This is the first book I have read that has actually helped me make money, rather than just provide broad based market overviews one sometimes reads. Overall good book, I would definitely recommend it.
Marianna Arnold (verified owner) –
I read a lot of investment books and manage my own portfolio and this book is definitely one of the best investing books that I have read in the last couple of years. What makes the book so interesting is that it explores a style of investing that is neither value nor growth. It is one of the few books that I have read that actually details an original investment strategy.
Essentially, the book is about predicting the behavior of analysts and thus trying to predict stock prices over the next quarter. Some strategies in the book are for the long-term , but mostly Zacks’ main idea is that analyst activity can be predicted because the analysts themselves are afraid of disagreeing with the “herd” of other analysts.
The book is very straightforward and easy to read. Unlike other investment books Zacks is focused on trying to explain how to effectively implement a strategy.
As a caveat, I did think the book was a little harsh on brokers.
Veda Cherry (verified owner) –
With recommendations on the back cover from John Bollinger, Burton Malkiel and Victor Niederhoffer, I did have high expectation on this book but I had been a little bit disappointed. The recommendation or the content is very straightforward. As concluded by the author, they include 1) buy stocks that are receiving upward earnings estimate revisions and sell stocks that are receiving downward earnings estimate revisions owing to “analyst creep” and delayed price response. 2) buy companies that are reporting earnings better than expectations and avoid companies that are reporting earnings worse than expectations owing to post earnings announcement drift and “cockroach effect”. 3) subscribe the Zacks Rank, which somebody did the homework of the above for you with a fee 4) focus on changes in analysts’ recommendations over time. The catch is: I doubt only a very small percentage of home investors have the time or resources to execute any one of the recommendations above for long and as a result they can only go to Zacks Investment Research for help, and thus bringing the whole book to something not far from a sales talk.
In short, if you are already aware of the innate problem with any analysts’ recommendation and you are not going to subscribe to any fee based research, this book is not for you. However, if you are a green hand in the investment game, prepared to shop for a research report and pick the stocks yourself, this book may still worth a read.
Deandre Bryant (verified owner) –
I learned a lot from this book about how earnings momentum is used to buy and sell stocks. Basically, momentum investors are looking for impending earnings surprises of a certain quality.
The book then induces you to try out the Zacks online service and get their daily earnings updates and eletters like “Profit from the Pros”. Don’t do it. Signing up will unleash a torrent of spam from Zacks for many of their services. I have unsubscribed numerous times and even emailed their customer service department. They did respond but I still get the crap. Even worse, they gave my name to a marketing partner and now I get even more garbage.
Keyla Jackson (verified owner) –
I believe that combining the strategies discussed in this book with CANSLIM provides a very powerful approach.
Like O’Neil, Zacks bases his research on real data; this data has been collected by the Zacks Investment Company for 15+ years.
This book is filled with dozens of graphs to better explain the research. Just like the Zacks ranking system this book is largely focused on one of the few good things a market analyst can give you – earnings estimates.
I believe that in the upcoming years Ahead of the market will be a book that I will be referring back to since it is excellent. The research is practical and I believe is an interesting strategy.
In closing I just want to say that this is one of the books I have read which I found to be really good and have the potential to assist us in our investing endeavors.
Kalel Yu (verified owner) –
This is a marketing ad for Zack’s and the only thing the book offers is that earnings matter (past, present and future) and oh yes Zack’s algorithm is the best so subscribe.
Claire Small (verified owner) –
One of the best books written on stock investment.
A very rigorous approach which combines economic theory behavioural finance and investment practice.
Aaliyah Kennedy (verified owner) –
The author makes valid points about the role of analysts in affecting stock prices. He certainly understands analysts and explains how to relate rationally to their recommendations.
However, he could have made the same points in one fifth the number of pages. He seems to be one of the many authors who have no respect for their readers` time.
If and when you skim this book, you will also be faced with the task of filtering out all of Zack’s self promotion.
Kensley Reyes (verified owner) –
I have suscribed to Zacks Investment Research on and off for the last 5 years.It finally dawned on me that instead of suscribig to the hype of the Zacks rank and mega-performance,why not due my due diligence and inquire about Zacks Money management arm where they are actually commiting real capital and running a fund.
I contacted Zacks and soon received a phone call from a rep who was part of Zacks investment marketing.After listening to the hype,I asked 2 simple questions I deemed essential before making an investment.
1)What were the actual returns for the last 5-10 years,i.e Audited track record
2)What were the volatility of those returns
Needless to say,he danced around the questions,never answered them and I never heard back from him…
Interestingly,I did a bit of research and found out how Zacks real money portfolios did in last years bear market.Without going into detail,it is safe to say you can NOT profit in any market using Zacks methodology,and you would not have been spared from the Bear in any way shape or form…
I am in no way saying that Zacks doesnt do fine research.They do,but in no way should you believe all the hype.There are many ways to make their “research” performance look outstanding,and zacks is a master marketing firm.
Adonis Corona (verified owner) –
This book has some very useful strategies.
Rome Cook (verified owner) –
Ok
Mckenna Duke (verified owner) –
Felt like this was a waste of my time, but I’ve wasted a lot of time early on in my research of the stock market. Not much actionable information, and a lot of record keeping that you need to engage in, since the indicators used are not readily available except in…. Zacks paid service! Skip this one, you’re not missing much if you do!.
Abraham Sheppard (verified owner) –
Other reviewers have already talked about the concepts and ideas presented in the book; so I won’t repeat them here. Overall Mr. Zacks does a really good job of laying-down and explaining the premise of the Zacks Rank and backing it up with his analysis of data available at the time. The “pitch” culminates in “Chapter Eight: It All Comes Together—The Zacks Rank: The Key to Successful Investing” in which he basically says that everything that he has presented in the previous seven chapters can be neatly captured in the Zacks Rank. In Chapter 9 he presents a basic strategy using Zacks Rank which can be summed up in these six steps (paraphrased and/or edited for brevity):
Step One: Make sure to hold enough positions in order to keep commission costs below 2% annually.
Step Two: Set sector exposure to match the sector exposure of the Zacks #1 Ranked portfolio.
Step Three: You should buy Zacks #1 Ranked stocks that are reasonably valued and have one or more of six favorable characteristics.
Step Four: Decide how much you want to be invested in the market and dollar-cost-average into the market over a period of time. Once invested, try to stay fully invested.
Step Five: Sell a stock if after three months the Zacks Rank falls to a 3 (Hold) or below. Sell a stock prior to three months if the Zacks Rank falls to 4 or 5 or if a stock announces a negative earnings surprise, or lowers earnings guidance.
Step Six: Rebalance positions after three months.
The remaining chapters provide insights and details regarding more advanced analysis of the data provided by analysts – good insights as to how some hedge fund managers use analysts’ data. Be sure to ignore what he says about the Fed Model at the end of Chapter Twelve as the Fed Model is no longer considered to be reliable.
The Conclusion chapter provides a summary of the four strategies he presents in the book; the first two of which depend on the premises that Zacks Rank is built on but do not involve using the rank itself. The third strategy is the one outlined above that was presented in Chapter 9 and the fourth is an advanced Zacks Rank strategy, called “piggybacking” that is presented in Chapter 10.
There are a few key things you need to understand if you are going to implement a portfolio using Zacks Rank (directly quoted or paraphrased from Chapter 9):
1) The Zacks Rank is a short-term indicator; of the stocks that have a Zacks #1 Ranking at the beginning of the month, only 44% will have that ranking by the end of the month.
2) Keep in mind that only 5% of all stocks covered receive a Zacks Rank of 1. Therefore, long-term investors should also seek to own stocks with a Zacks Rank of 1 or 2, and in some cases 3.
4) One of the biggest obstacles that you will face is keeping turnover low to minimize commission expenses.
5) The list of Zacks #1 Ranked stocks will be over-represented by small to mid-cap stocks. That is why a large-cap stock with a Zacks Rank of 2 is actually a very good ranking and may still provide excellent upside potential relative to the overall market.
6) So, in reality the Zacks Rank acts as an initial filter that provides a raw list of potentially successful investment candidates. With these raw lists you can do additional screening according to your own investment criteria.
So while it is true that you would only see the returns claimed if you could invest in the 200+ #1 ranked stocks and turn that list over accordingly every month I think there still is an opportunity to use Zacks Rank to your advantage. Starting in June, I intended to “paper trade” a portfolio based on the strategy outlined in Chapter 9 for three months and see how it goes; the $250/yr subscription is a small price to pay for the experiment. I’ll report back at the beginning of September.
Other random thought: this book was written in 2003; the data and examples in it are in desperate need of a refresh.
Rudy Quintero (verified owner) –
DON’T SAY YOU WEREN’T WARNED! Zacks has been one of the most horrible experiences in my life! Out of EVERYTHING I’ve been through! Their platform doesn’t work half the time – often bringing me to someone elses account! Now that’s real reassuring, isn’t it? Their customer service people pick and choose what to answer and what not to – Of course the most important things are ignored. Logs me out every 10 minutes then brings me back to the wrong platform. I spend more time trying unsuccessfully to get help from their customer service and fixing what they keep breaking I have no time for trading! Stop orders are not executed – their response was “Too bad, that’s life in internet trading!” I would very strongly advise anyone to sta y far away from this place, these people, and their outlook.
Parker Mays (verified owner) –
Great Reading
Eli Rivas (verified owner) –
Nothing new or interesting for newby or experienced trader. Money for nothing. Also be careful and never tell to Zacks your bank card details for $1 subscription: this is the way to charge you $299 monthly for nothing!
Averie Berry (verified owner) –
Fast service, accurate description, highly recommended!
Jadiel Webster (verified owner) –
Get the inside scoop on stock ratings from Zacks