Building a successful investment portfolio takes skill and hard work, no matter if you're a growth, value, income, or momentum-focused investor.

How do you find the right combination of stocks that will generate returns that could fund your retirement, or your kids' college tuition, or your short- and long-term savings goals?

Enter the Zacks Rank.

What is the Zacks Rank?

The Zacks Rank is a unique, proprietary stock-rating model that utilizes earnings estimate revisions to help investors build a winning portfolio.

There are four main factors behind the Zacks Rank: Agreement, Magnitude, Upside, and Surprise.

Agreement is the extent to which all brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of analysts revising their estimates higher, the better chance the stock will outperform.

Magnitude is the size of the recent change in the consensus estimate for the current and next fiscal years.

Upside is the difference between the most accurate estimate, which is calculated by Zacks, and the consensus estimate.

Surprise is made up of a company's last few quarters' earnings per share surprises; companies with a positive earnings surprise are more likely to beat expectations in the future.

These four factors are assigned a raw score that's recalculated every night, which is then compiled into the ranking system. Stocks are classified into five groups using this data, ranging from "Strong Buy" to "Strong Sell."

The Power of Institutional Investors

The Zacks Rank also allows individual investors, or retail investors, to benefit from the power of institutional investors.

Institutional investors are responsible for managing the trillions of dollars invested in mutual funds, hedge funds, and investment banks. Research has shown that these investors can and do move the market due to the large amount of money they deal with, and thus, the market tends to move in the same direction as them.

In order to determine the fair value of a company and its shares, institutional investors design valuation models that focus on earnings and earnings estimates. Because if you raise earnings estimates, it then creates a higher fair value for a company and its stock price.

With these changes, institutional investors will act, usually buying stocks with rising estimates and selling those with falling estimates. An increase in earnings expectations can potentially lead to higher stock prices and bigger gains for the investor.

Retail investors who get in at the first sign of upward revisions have a distinct advantage over larger investors since it can often take weeks, if not months, for an institutional investor to build a position. They'll also benefit from the expected institutional buying that could follow.

Not only can the Zacks Rank help you take advantage of trends in earnings estimate revisions, but it can also provide a way to get into stocks that are highly sought after by professionals.

How to Invest with the Zacks Rank

The Zacks Rank is known for transforming investment portfolios. In fact, a portfolio of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 32 years, with an average annual return of +25.41%.

Moreover, stocks with a new #1 (Strong Buy) ranking have some of the biggest profit potential, while those that fell to a #4 (Sell) or #5 (Strong Sell) have some of the worst.

Let's take a look at

Virtu Financial (VIRT Quick QuoteVIRT - Free Report)

Headquartered in New York, NY, Virtu Financial is a market-leading financial services firm that leverages cutting-edge technology to provide execution services and data, analytics and connectivity products to its clients and deliver liquidity to the global markets. It provides a wide array of offerings in execution, liquidity sourcing, analytics and broker-neutral, multi-dealer platforms in workflow technology. The company was founded in 2008.

For fiscal 2025, five analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.32 to $3.98 per share. VIRT boasts an average earnings surprise of 20.2%.

Earnings are expected to grow 12.1% for the current fiscal year, while revenue is projected to increase 5.3%.

VIRT has been moving higher over the past four weeks as well, up 2.8% compared to the S&P 500's gain of 0.6%.

Bottom Line

With a #1 (Strong Buy) ranking, positive trend in earnings estimate revisions, and strong market momentum, Virtu Financial should be on investors' shortlist.

If you want even more information on the Zacks Ranks, or one of our many other investing strategies, check out the Zacks Education home page.

Discover Today's Top Stocks

Our private Zacks #1 Rank List, based on our quantitative Zacks Rank stock-rating system, has more than doubled the S&P 500 since 1988. Applying the Zacks Rank in your own trading can boost your investing returns on your very next trade. See Today's Zacks #1 Rank List >>