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This week, I'll focus on another winning screening strategy that is both easy to build and easy to use with our Research Wizard program. This one primarily focuses on Earnings Growth (both historical and projected).
First I'm screening for Zacks # 1's. (The Zacks Rank is probably one of the best, if not the best rating system out there.)
They also have to have an average broker rating of # 1. (Since the avg. broker is typically bullish 'everything', they have to be on board these or else I'm not.)
Their most recent Annual EPS Growth (F0/F-1) has to be >= 20%.
And their two most recent Quarter over Quarter periods (Q0/Q-1 and Q-1/Q-2) are >= 5%.
The % Change in Current Quarter Estimates (Q1) over the last 4 weeks has to be >= 0. (Negative revisions are disqualified.)
They also have to have a positive or flat broker rating change within the last 4 weeks too. (Expressed as % Rating Change -- 4 Weeks >= 0. In other words, no broker downgrades.)
And lastly, all of the stocks have to be trading at or above $5.
I ran multiple tests, using a four-week rebalancing period over the last 2 yr. time span. (Each run was rebalanced over different four-week periods to eliminate coincidence and verify robustness.)
In 2002, the average annualized gross returns were over 43% in comparison to the S&P 500's -22%.
And in 2003, the average annual gross returns were over 76% in comparison to the S&P 500's 29%.
The strategy's win ratio (winning periods) was over 75%. And on average, you only had to hold onto 8 stocks in your portfolio a month.
Here's 3 from this week's list (for the week of 1/26/04).
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