The Difference between Average Brokerage Recommendation (ABR) and the Zacks Rank

Zacks provides the average brokerage recommendation (ABR) for thousands of stocks for most of the leading investment web sties. The ABR is the calculated average of the actual recommendations (strong buy, hold, sell etc) made by the brokerage firms for a given stock. The ABR is typically displayed with decimals (e.g. 1.52) versus the Zacks Rank, which is only shown in whole numbers (e.g. 1, 2, 3, etc.).

Although the ABR is displayed in a range of 1-5, it should not be confused as having any similarity to the Zacks Rank. The ABR is solely based on brokerage recommendations. Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. For every "Strong Sell" recommendation, brokerage firms assign FIVE "Strong Buy" recommendations. Although brokerage recommendations may have some value, on average, they have not proven to be successful in directing investors to the stocks with the highest probabilities of rising in price.

In comparison, the Zacks Rank is applied proportionately across the universe of all stocks for which brokerage analysts provide earnings estimates for the current year. At all times, the same number of Zacks #1 ("Strong Buy") and Zacks #5 ("Strong Sell") rankings are assigned. Further, Zacks #1 Rank stocks have generated an average annual return of 26% since 1988 versus just 2.16% for the Zacks #5 Rank stocks. In other words, the Zacks Rank will help you identify the winners and avoid the losers in all market conditions.

"I bought several stocks that appeared in the Number 1 listing that I continue to hold as ''core holdings''"
Robert Taylor
Edisto Island, SC

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Zacks Rank Guide Table of Contents

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