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Finding #1 Stocks: Screening, Backtesting and Time-Proven Strategies by Kevin Matras

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Chapter 5

Beyond the Zacks Rank

While the Zacks Rank has proven to be one of the best rating systems out there, traders shouldn’t stop at using only the Zacks Rank. Since there are over 200 stocks with a Zacks #1 Rank on any given day, it would be virtually impossible for most traders to trade them all.

So now it’s time to narrow that list of stocks to a smaller, more manageable number of stocks for a real life portfolio.

Filtering the Zacks Rank

In good markets or bad, stocks with a Zacks #1 Rank continue to outperform the market. Since there are typically hundreds of stocks Ranked #1 by Zacks at any time, it’s important to know what filters to apply to generate a smaller, more tradable list of stocks.

Two filters in particular, when applied to Zacks #1 Rank stocks, not only narrow the number of qualified stocks to a more practical portfolio size, but oftentimes increase its performance as well.

Let’s take a look at what those filters are.

Parameters

The screen starts off with the Zacks Rank. And then the two additional filters are added to it.

  • Zacks Rank = 1

    Strong Buys.

  • % Change (Q1) Est. over 4 Weeks > 0

    Positive current quarter estimate revisions over the last four weeks.

  • % Broker Rating Change over 4 Weeks =Top # 5

    Top five stocks with the best average broker rating changes over the last four weeks.

These two items, added to the Zacks #1 Rank, produce powerful results!

Methodology

Let’s take a closer look at why.

  • Zacks Rank = 1

    Once again, these are the best performing ...

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