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Zacks Investment Research has two powerful stock rating systems: the Zacks Rank, which you have been reading about, and the Zacks Recommendation. Each provides valuable insights into the future profitability of a stock and can be used separately or in combination with each other depending on your investment style.
As you now know, the Zacks Rank is a short-term rating system designed to predict price movements over the next 1-3 months. The Zacks Rank universe covers approximately 4,400 stocks.
The Zacks Recommendation was created as a system to provide superior long-term recommendations on the same group of 4,400 stocks. The Zacks Recommendation compliments the Zacks Rank by effectively predicting price movements over periods of six months or longer.
The philosophy at Zacks is that quantitative models, like the Zacks Rank, can predict stock prices more accurately than individual analysts. However, we recognize that quantitative models are most effective when they are employed by analysts who have deep fundamental knowledge of the company and its industry. Zacks Recommendations provide that best of both worlds approach given the usage of both a quantitative model and equity analysts.
First, because there are often factors such as valuation, industry conditions and management effectiveness that a trained investment professional can spot better than a quantitative model. Second, and most importantly, Zacks Equity Research analyst recommendations have overall outperformed the model in the cases where they have overridden the quantitative recommendations.
The short answer is that it depends on your investment time horizon. If you are a short term trader, then the Zacks Rank with its 1-3 month outlook is most appropriate. If you are a long-term investor, then best for you to turn to the Zacks Recommendations that is meant for a 6+ month time horizon. You might also want to search for stocks that are highly rated by both systems.
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Zacks Rank Guide Table of Contents
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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1986 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1986-2011 and were examined and attested by Baker Tilly, an independent accounting firm.
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