Filtering the Zacks Rank

I’m sure most everyone reading this knows of the power of the Zacks #1 Rating and its consistently fantastic returns in all markets. (Average annual return of 33.08% since 1988.)

But what I want to focus on today is how to try and recreate those returns in a practical trading account.

Since focusing only on Zacks #1 Rated picks will typically give you over 200 qualified stocks at any time, it’s important to know what other filters to apply to the Zacks Rank to generate a smaller (more tradable) watchlist.

Two filters in particular, when added to the Zacks Rank of #1, not only narrows down the number of qualified stocks to a practical portfolio size (approx. 10-12 stocks), it also increases its performance as well.

The two filters I’m talking about are Earnings Estimates Revisions (% Change Q1 Est. over 4 Weeks > 0) and Brokerage Rating Changes (% Broker Rating Change over 1 Week > 0). These two items added to the Zacks #1 Rank, produce powerful results!

For instance; in 2002 (using a 4 week rebalancing period), the Zacks #1 Rated stocks returned nearly 5%, with an average portfolio size of approx. 200 stocks. A truly impressive return, especially when compared to the S&P 500’s –19%.

But holding onto 200 or so stocks isn’t doable for most investors. But when adding the two aforementioned filters, the portfolio size shrinks to a tradable 11 stocks (on average), and a phenomenal 22% return.

In 2003, the Zacks #1 list (approx. 200 stocks) did over 72% in comparison to the S&P 500’s nearly 29%.

But the filtered Zacks Rank narrowed that list down to only 10 stocks (on average) with a return of over 86%. (An even larger return with a realistic portfolio size.)

And it’s right on track again so far this year too (2004). The annualized YTD returns for the Zacks #1 Ranked stocks are up 16.1% with an average portfolio size of 202 stocks.

But the filtered Zacks #1’s annualized YTD returns are up 37.6% with only 11 stocks to hold on average.

There are currently 16 stocks qualifying this filtered Zacks Rank this week. Here’s a few of them:

NWSB Northwest Bancorp, Inc.
SRDX - Analyst Report SurModics, Inc..
UNT - Snapshot Report Unit Corp

Get the rest of the stocks on this list and start trading the filtered Zacks Rank in your own account. Remember, the key to successful screening is in discovering those screens that have produced profitable results in the past. And that`s exactly what you get with the Research Wizard stock picking and backtesting program. Click here and find out how .

Read the full analyst report on NWBI

Read the full analyst report on SRDX

Read the full analyst report on UNT