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Building a Winning Portfolio for 2017

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Stocks have done exceptionally well in recent years, with the S&P 500 index producing a double-digit return in 2016 and up more than +200% from the 2009 lows. But many investors didn't enjoy such strong returns in their own portfolios.

Why is that?

The simple answer is that they were in the wrong stocks because most investors typically invest without a clear roadmap. The rising tide of a broad rally will produce plenty of green arrows in most portfolios. But that is not enough to come out ahead of the market, which should be the goal of every investor.

It is reasonable to be optimistic about the investment environment in the New Year in light of expectations of market-friendly policies from the incoming administration. There are no doubt some great opportunities, but the New Year also brings its share of challenges. Thus now is exactly the time to make those decisions to put your portfolio on a sound footing for the year ahead. I hope the ideas in this article will help you do just that.

This May Not Be For You

If you are someone who has a consistent stock selection system that helped you come ahead of the market in 2016 and the preceding years, then you probably don't need our advice. Feel free to stop reading at this stage.

With the rest of you, I would like to share the investment process that we rely on here at Zacks, which makes use of 5 different factors to build a winning portfolio. Each one of these factors individually will help you pick good stocks. But putting all of them together gives you a significant edge over others in stock market investing.

This process lies at the heart of our Zacks Top 10 Stocks for 2017 service, which is about to be made available. This stock-selection process, called the Zacks Method for Investing, helped us perform strongly in 2016, with the Top 10 portfolio returning +12.9% through December 15th. The portfolio returned +11.9% in 2015 and 10.8% in 2014.

A random selection of good stocks, without an overarching outlook for the market, will not give you the desired results. The portfolio is essentially the execution of your outlook for the market. For the Top 10 Stocks for 2017, we started with the market outlook and then used these factors to build the portfolio.

More . . .


Releasing Tuesday: Zacks Top 10 Stocks for 2017

Start the New Year strong with our Top 10 Stocks for 2017 portfolio. This buy-and-hold investing opportunity perfectly positions you for market-beating gains no matter what the market has in store in the upcoming year. In fact, from January 2012 through September 2016, this portfolio has nearly doubled the S&P 500 with a total gain of +161%. And we anticipate building on our success in 2017.

Those who get in early can lock in maximum profit potential. So get in on the ground floor today and be among the first to see these picks when they're released this Tuesday, January 3.

Be first to see them >>


The 5 Elements of the Zacks Method for Investing

1) Valuation - There is plenty of empirical evidence showing that stocks with low valuations will outperform the market over the long haul. It's not easy to find 'cheap' stocks after the market's impressive run, but we look for companies that are trading with low Price-to-Earnings [P/E] and Price-to-Book [P/B] multiples relative to their peers and their own history.

2) Management Effectiveness - It is very important to get a sense for how effective the company's management is in utilizing the resources available to them. This can be done a number of different ways, but our research shows that Return on Equity [ROE] does a good job of capturing this attribute. So we seek out companies generating ROEs that are superior to their industry peers.

3) Recent Analyst Upgrades - Our research also clearly shows that stocks that have recently received a recommendation upgrade from brokerage analysts will continue to outpace the market. Most of that benefit is felt in the short run. However, quite often a stock that receives one upgrade is likely to get more in the future, which keeps pushing the stock higher.

4) Best Industries - Even the best looking stock will underperform the market if it's in an out-of-favor industry. That is why we overweight stocks from the best industries and sectors. And there is no better guide to choosing the right groups than the Zacks Industry Rank, which focuses on the earnings estimate revisions for all the stocks in the industry.

5) Timeliness - There is no better timeliness indicator than the Zacks Rank, which has produced annual returns of +26% since 1986 for Zacks Rank #1 (Strong Buy) stocks. We look for #1 and #2 Ranked stocks, but will consider #3 Ranked stocks if they show the potential for upgrade. These signals tell us that now is a good time to get into the stock.

Zacks has long been known for harnessing the power of earnings estimate revisions to foretell stock prices. No surprise then that half of the six factors makes use of this powerful driver.

How to Find This Information?

The first three of these elements are free and widely available from and other investment websites. If you just concentrated on these elements, you would be much better off than you are now.

The last two elements are proprietary to Zacks Investment Research and only available through our premium subscription services. Adding these two elements to the free ones above will put an almost unfair advantage in your hands.

The best way to tap into all 5 elements right now is through our Zacks Top 10 Stocks for 2017 service. These stocks have been hand selected to outperform the market, which is amply borne out by its recent performance of double-digit returns in each of the last four years.

And keep in mind that the stocks we have picked for 2017 fully take into account the opportunities and challenges waiting for us in the New Year.

Get a head start by taking full advantage of this long-term investing opportunity by being among the first to see the 10 stocks when they're released this Tuesday, January 3. After all, the sooner you invest in the Zacks Top 10 Stocks for 2017 portfolio, the more you figure to gain. Plus, you will be well positioned to withstand any market uncertainty with fewer worries in the year ahead.

Be First to See the Zacks Top 10 Stocks for 2017 >>

Happy Investing,

Sheraz Mian

Sheraz Mian is the Director of Research. He determines which valuable data to use to assess winning stocks and funds. He is a contributor for Zacks Equity Research and Earnings Analysis, and is also the Editor of Zacks Top 10 Stocks.