Whether you're bullish on the market or bearish; whether you
believe there's more upside to go, or that the market has topped
out; it's now more important than ever to make sure you're doing
everything you can to get the most out of your trades.
Regardless of which camp you put yourself in, there will be
distinct winners and losers as we move forward. So before you make
your next trade, please read this first to learn how to put the
probabilities of success on your side.
Knowledge Is Power
We've all heard the old adage: knowledge is power.
It's a great saying because it's true.
And that saying couldn't be truer than when it comes to investing.
Take a look at your last big loser for example. After analyzing
what went wrong, you soon discover some piece of information that
-- 'had you known that, you never would have gotten into it in the
I'm not talking about things that are unknowable, like inside
information or surprise announcements that can catch even the most
professional of professionals off guard.
I'm talking about things that you could have known about or SHOULD
have known about before you got in.
Did You Know?...
- Did you know that roughly half of a stock's price movement
can be attributed to the group that it's in?
- Did you also know that oftentimes a mediocre stock in a top
performing group will outperform a 'great' stock in a poor
- And did you know that the top 50% of Zacks Ranked Industries
outperforms the bottom 50% by a factor of more than 2 to 1?
- And did you also know that the top 10% of industries
outperformed the most?
Was your last loser in one of the top industries or in one of the
If it was in one of the bottom industries, you should have known to
not take a chance on something with a reduced probability of
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That's what is meant by knowledge is power. Knowable things that
you need to know.
That's not to say that stocks in crummy industries won't go up --
they do. And that's not to say that stocks in good industries won't
go down -- because they do too.
But more stocks go up in the top industries, and more stocks go
down in the bottom industries.
And since there are over 10,000 stocks out there to pick and choose
from, why settle for one with a reduced chance of making any money?
Did You Know?...
- Did you know that stocks with 'just' double-digit growth
rates typically outperform stocks with triple-digit growth rates?
- Did you also know that stocks with crazy high growth rates
test nearly as poorly as those with the lowest growth rates?
Did your last loser have a spectacular growth rate?
If so, and it got crushed, would you have picked it if you knew
that stocks with the highest growth rates have spotty track
It seems logical to think that the companies with the highest
growth rates would do the best. But it doesn't always turn out to
be the case.
One explanation for this is that sky high growth rates are
unsustainable. And the moment a more normal (albeit still good)
growth rate emerges, the stock gets a dose of reality as well.
Instead, I have found that comparing a stock to the median growth
rate for its industry is the best way to find solid outperformers
with a lesser chance to disappoint.
Did You Know?...
- Did you know that stocks receiving broker rating upgrades
have historically outperformed those with no rating change by
more than 1.5 times? And did you know they outperformed stocks
receiving downgrades by more than 10 x as much? The next time one
of your stocks is upgraded or downgraded, be sure to remember
these statistics so you know how the odds stack up and whether
they're for you or against you.
- Did you know that stocks with a Price to Sales ratio of less
than 1 have produced significantly superior results over
companies with a Price to Sales ratio greater than those levels?
And did you know that those with a Price to Sales ratio of
greater than 4 have typically shown to lose money? That doesn't
mean that all stocks with a P/S ratio of less than one will go up
and those over four will go down, but you can greatly increase
your odds of success by following these valuations.
- Do you know what an R-Squared Growth rate is? What if you
did? We have a screen that utilizes this seldom looked at item
that has handily beaten the market over the last 10 years and was
up 14.2% in 2008's bear market, while the S&P 500 was down
-37%. That screen is aptly called the R-Squared EPS Growth
Do you know how well your stock picking strategies have performed?
Whether good or bad - do you know why?
Do you know if your favorite item to look for is helping you or
Get the answers to these questions and more. And discover what
works and what doesn't before your next trade. Learn how to take
full advantage of today's market.
I discovered all the above with the
(including a strategy that has averaged gains of +67.4% per year).
And you can too. If you have a question, plug it in and get your
answer. Find winning strategies. Or create your own. And test
virtually any idea you can think of. Now you can.
Click here to learn more.
Thanks and good trading.
Zacks VP Kevin Matras is our chart patterns and stock screening
expert. He also personally developed many of the built-in
market-beating strategies that come with the
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