Two Simple Filters Added to the Zacks Rank for Powerful Returns - Screen of the Week
The last time I talked about this strategy was back in 2009.
Prior to that, it was featured in October 2007, right before the bear market hit.
When I talked about it then, this strategy had shown an average annual return of 72.7% per year going all the way back to 2000 (2000 thru Sept. 2007 - nearly 8 years at that time).
2008, as you might have guessed, was a tough year. But that's part of trading.
There will always be challenges along the way. However, using a proven profitable strategy can give you the confidence to stick with it, knowing that the odds of success are in your favor.
A proven profitable strategy is, of course, different than a box of magic. Nothing will ever preclude you from having another losing trade. But following sound and tested stock-picking rules can help you beat the market over and over again.
2009 to 2012
So how has it done since the last time I talked about it in 2009?
Clearly, looking at how well it's done, I should have trotted this one out a few times since then. Although, I did write about it in my book Finding #1 Stocks in 2011.
But for those who missed it, here you go: between 2009 and Oct. 2012, using a 1 week holding period, this strategy showed an average annual return of 35.7% vs. the S&P's 13.7%.
That's more than 2.6x the S&P 500. And you only needed to hold 5 stocks at a time.
It's a pretty easy strategy to trade. But you will be rebalancing your portfolio weekly. So if you're an active trader, you'll love it.
Even if you're not, seeing the stocks that it picks is exciting to watch.
There are three items that go into this screen:
- Zacks Rank equal to 1
As you know, the Zacks Rank is one of the best ranking systems out there. Over the last 26 years, the Zacks #1 Rank stocks have shown an average annual return of over 26% a year. This screen starts off by focusing in on these.
- % Change Current Quarter Estimates over 4 Weeks greater than 0
This item is important because, while the Zacks Rank already looks at the Current Year's Estimate Revisions and Next Year's Estimate Revisions, this added component looks at the more immediate future, which is the Current Quarter. And by saying greater than zero, we're excluding any company with a negative revision.
- % Change in the Average Broker Rating over 1 Week equal to Top # 5
This means I'm looking for the 5 stocks with the biggest or best change in their average broker rating. In other words, brokers have been upgrading the stocks. While I don't really follow broker recommendations, per se', since I believe they're skewed to the upside, I do like to see the change in the rating. Are these guys getting more bullish or less bullish? This is good to know. So I want to make sure the average broker rating has gotten better, or at least not gotten worse, over the last week.
Combined, these three items produce some very powerful results.
This strategy comes loaded with the Research Wizard and is called: bt_sow_filtered zacks rank2. It can be found in the SoW (Screen of the Week) folder.
Here are three of the stocks that qualified the Filtered Zacks Rank2 strategy for 11/6/2012:
STC - Stewart Information Services Corp.
TFX - Teleflex Inc.
TIS - Orchids Paper Products Co.
Get the rest of the stocks on this list and start trading the Filtered Zacks Rank2 (or any of our other strategies) in your own account. Remember, the key to successful screening is in discovering those screens that have produced profitable results in the past. That's exactly what you get with the Research Wizard stock picking and backtesting program.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks' portfolios and strategies are available at: http://www.zacks.com/performance .