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One of the most successful strategies to continually beat the market is to buy the best stocks in the hottest industries. Zacks.com offers two ways to follow this road to investment success.

• Zacks Industry Rank
• Industry Rank by ABR

ABR Defined
As the name implies the ABR will show you the average of brokerage recommendations on a given stock. The benefit is that you quickly get a snapshot of where Wall Street stands on a stock without having to read a mountain of research reports.

How is the ABR Created for an Individual Stock?
Each brokerage research report carries with it some form of recommendation. The brokerage firms may use different lingo for their rating systems (like saying Outperform instead of Buy), but they can all be properly sorted into our 5 level classification system that is now the industry standard. Each of the 5 classifications has a value associated with it to help compute the ABR. Below we show you an example of a stock with 10 brokerage recommendations and how it adds up into the ABR.

The lower the ABR number, the more favorable Wall Street is on the company. Over the years we have found only modest value in knowing the current ABR for a stock. What is much more powerful is the direction the ABR is moving. Stocks with improving ABRs will outperform the market and visa versa for those with eroding ABR's.

How is the Industry ABR Created?
Zacks uses a system that classifies stocks into approx. 200 different industries. The Industry ABR is simply the average of individual stock ABR's within the industry. For example in the Computer Graphics industry we have show (5) stocks that currently have an ABR. When you sum up the value of the ABRs for those stocks and divide by five you get the Industry ABR.

Just like we noted above, there is some benefit to knowing the current ABR for an industry. Even more potent is knowing that the Industry ABR is improving. The best possible Industry to invest in is one with a very low ABR where the ABR has improved week over week. Our Industry Rank by ABR display makes it very easy to find these industries, and then drill down to the best companies in those industries.

How to Read the Industry Rank by ABR table
Here is a snapshot of the Industry Rank by ABR table. Below you will find column by column descriptions of how to interpret this information. Note that you can resort the table by clicking on any of the column headings.

Rank: Here you will find how the industry ranks versus the other 200+ industries based upon the current ABR. Quite often stocks with just one or two stocks may have an artificially high or low ABR given the lack of diversity in the portfolio. Bigger industries with high rankings are definitely worth paying attention to. If multiple industries share the same ABR then they will also have the same Industry Rank. See above how three firms are tied in 2nd place with an Industry ABR of 1.50.

1-Week Change: How much higher or lower is the rank this week versus last. As noted above, the direction of change is usually more predictive of future stock performance than the absolute rank level. You want to be investing in highly ranked industries showing solid week over week improvement.

Industry (# of stocks): Listing of industry names. Inside the parenthesis is the # of stocks currently with ABRs within the industry. Clicking on this link will take you to the ABR Rank in Industry table displaying all the stocks in the industry listed from best to worst ABR.

Current ABR: Calculated for the industry as we noted above.

Previous ABR: Display of the Industry ABR from 1 week ago to highlight magnitude of ABR change week over week.

Upgrades 1-Week: If the ABR improved it is most likely due to some recommendation upgrades (Ex. Stock is raised from a Hold to Strong Buy). Here you get to see the level of that activity in the past week.

Downgrades 1-Week: Same concept as upgrades, but here you see number of recommendations downgraded over the week.

ABR Rank in Industry
Once you have uncovered the best industries, you will then want to see the ABR for the companies within the industry. (Remember, Step 1 = Best Industry. Step 2 = Best Stocks in the Industry): To see the ABR Rank in Industry, then click on the Industry name link in the table above.

Learn more about ABR Rank in Industry

Resources
Industry Rank by ABR
Zacks Industry Rank
Zacks Industry Rank Analysis