What Is Zacks Investment Research?

What Is Zacks Investment Research?

Let me tell you about Zacks Investment Research—it's an American company that focuses on producing independent research and content related to investments. Founded back in 1978 by Len Zacks, who drew from his Ph.D. work at MIT, this firm delivers financial data and analysis to professional investors. You can use it to make smarter decisions for your own accounts or those of your clients.

What stands out most is Zacks' extensive consensus earnings-per-share (EPS) estimates. Lately, they've expanded into research reports, stock recommendation summaries, prices, funds, charts, tables, and various other tools and data. If you're looking for reliable investment insights, this is where you turn.

Key Takeaways

Zacks is straightforward: an American outfit producing independent research and investment content, started in 1978 by MIT Ph.D. scholar Len Zacks. They emphasize earnings estimate revisions, which Len Zacks called the most powerful force on stock prices. Their Zacks Ranks rate stocks from one to five, where #1 is Strong Buy. They've extended this to mutual funds and ETFs as well.

Understanding Zacks Investment Research

Here's how it works: Zacks employs a quantitative stock-rating system that's entirely mathematical, free from any analyst biases or personal preferences. It hinges on EPS metrics, especially revisions to projected earnings.

They gather data daily from electronic feeds and printed research on over 8,500 North American publicly traded companies, sourced from 185 brokerage firms. By aggregating thousands of analysts' opinions, Zacks pinpoints the expert consensus on a stock's earnings potential. This approach gives you a clear, data-driven view.

Zacks Ranks

A core part of Zacks' offerings is the Zacks Ranks, which categorize equities by their earnings potential. It started with stocks but now covers mutual funds, ETFs, and more.

Stocks get ranked from Strong Buy to Strong Sell based on aggregated brokerage assessments. The company states that their Strong Buy stocks have averaged over 25% annual returns, outperforming the S&P 500 in 26 of the last 30 years.

The system uses four criteria: agreement among analysts on valuation changes, the magnitude of recent consensus shifts, the upside compared to Zacks' calculations, and recent positive earnings surprises. This stems from Len Zacks' view that upward earnings revisions drive institutional buying, boosting prices—something you as a small investor can capitalize on quickly.

Important Note on Zacks Ranks

Remember, Zacks Ranks rate from one to five, and unlike many systems, #1 means Strong Buy. That's a key distinction you should keep in mind.

Zacks vs. Morningstar

People often compare Zacks to Morningstar, another Chicago-based firm that analyzes mutual funds and ETFs with a five-tier rating scale.

The difference lies in their methods: Zacks sticks to quantitative analysis of performance, while Morningstar leans on fundamental analysis. Morningstar's formula uses past performance for category rankings. Both provide free and paid options with varying access levels, so choose based on what fits your needs.

Example of Zacks Investment Research

To show how it performs, Zacks highlights cases like LSB Industries (LSX), rated Strong Buy in July 2012 due to anticipated earnings revisions. Analysts kept revising upward, and within three months, it delivered 36% gains versus the S&P 500's 5%. That's the kind of edge you might get.

The Bottom Line

Zacks is one of several firms offering data on stocks, funds, and investments, but it differentiates with its quantitative focus on earnings revisions as predictors of strong performance. Since analysts are conservative with revisions, these can signal big opportunities ahead.

What Is Zacks Stock Screener?

The Zacks Stock Screener is a paid tool that lets you filter stocks by metrics like price changes, dividends, or ROI. True to their style, it includes sorting by Zacks Rank and EPS changes, helping you find what matches your criteria.

How Much Does Zacks Stock Screener Cost?

You get Zacks Premium Screens with a premium membership at $249 per year, or higher tiers up to $2995 annually. It's straightforward pricing for the access you need.

What Is the Zacks Industry Rank?

This is the average Zacks Rank for all companies in a sector, useful for spotting industry trends that could lift related stocks.

What Is the Zacks Mutual Fund Rank?

Similar to stock ranks, this rates 19,000 mutual funds quarterly based on the average Zacks Rank of their holdings and other quantitative factors.

What Is the Zacks ETF Rank?

This system ranks ETFs for a favorable one-year outlook, considering expense ratios, momentum, yields, and underlying assets.