Zacks Method for Trading More than Levels the Playing Field - Voice of the People

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Zacks highlights commentary from People and Picks Member «JohntheWizard».

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Zacks Method for Trading more than levels the playing field with professional investors?


As stated before, the back test is the best Indicator I have for any Investment Strategy.

Zacks #1 Rank "Strong Buy" picks are companies with earnings estimates that have jumped the most. These stocks have beaten the S&P 500 nearly three times over with an average yearly gain of +28%. If you applied The Method back in 1988, you could have exploded a $10,000 investment into over $3 million with monthly rebalancing equally weighted portfolios of roughly 220 stocks.

So the add runs."Equally weighting of roughly 220 stocks" is my addition.

Exploding $10k into $3 million over 23 years implies a compounding yearly gain of 28.14%!

Does it really work like that?

What apparently worked beautifully until December 1999 started to lessen until the onset of the credit crisis and is a losing game already for more than four years.

When you back test these monthly changing portfolios of 220 stocks over the past 12 years using Research Wizard, and apply the rules of this game (Market cap > $100 Million and Share Price >$1.5) gives you 13.2%/year with a maximum risk of -57%. The first half of these past 23 years this strategy must have worked a lot better than the second part.  

Since October 2007, the beginning of the credit crisis, these monthly ZR#1 portfolios even underperformed the S&P500 Index by -5%. Since October 2007, you would have lost -17.5% or yearly compounded a loss of -4.5%.

In addition, comparing equally weighted portfolios where the smaller stocks tend to dominate the results with market cap weighted portfolios (S&P500) where the larger stocks tend to dominate the results is like comparing apples with oranges. Large investors need large stocks for their large sums of money.

Small investors can get away with smaller stocks with often smaller daily dollar volumes. If you would have consistently invested in the 40 smallest caps of ZR#1ranked stocks, you would have made 10% since October 2007. I believe that is one of the best back tested result you could have gotten during these past 4 years using the Zacks Method for small Investors and allowing for daily dollar volumes in excess of $450,000. Real life involves slippages, transaction costs and usually doesn't allow for compounding the results as the stocks are too small for that.

As stated before, the back test is the best Indicator I have for any Investment Strategy.

The most recent picks by «JohntheWizard» are:
A buy rating on VistaPrint ( VPRT )
a buy rating on Tractor Supply Co. ( TSCO ) and
a buy rating on Regal Entertainment ( RGC ).

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REGAL ENTMNT GP ( RGC ): Free Stock Analysis Report
 
TRACTOR SUPPLY ( TSCO ): Free Stock Analysis Report
 
VISTAPRINT NV ( VPRT ): Free Stock Analysis Report
 
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Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: RGC , TSCO , VPRT

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