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Zacks Top Ten Strategies For Outperforming the Market

  1. Do your own research and beat the analysts.
  2. Follow changes in earnings estimates.
  3. Follow changes in Brokerage Analyst Recommendations
  4. Look at companies that report EPS surprises.
  5. Use the Zacks Rank for buy/sell decisions.
  6. Use the Zacks Focus List to enhance your portfolio performance.
  7. Combine the power of Zacks two best stock lists by using the Timely Buys portfolio.
  8. Go straight to the Stock Pick of the Month.
  9. Buy stocks recommended by All-Star Analysts
  10. Own the Top Broker Buy List Stocks
1. Do your own research and beat the analysts.

Why should I use this strategy?

To win big, all you have to do is find a stock that is underestimated by the analysts. While this may be difficult, we do not think it is impossible.

How can I implement this strategy?

  • By spending the time and effort to understand the company history and financials, you can arrive at your own conclusion as to what the EPS will be in the future, which will enable you to make a more accurate EPS forecast and "beat the analysts."
  • If you want to do a little less work, you can look at the track records of the analysts (using the "Broker Recommendation" page on the Company Report) and go with the estimate of the analyst with the best EPS accuracy track record.
2. Follow changes in earnings estimates.

Why should I use this strategy?

Changes in earnings estimates are the most consistent leading indicator of the direction in which a stock is going to move. Since earnings estimates are specific, they measure individual stocks as opposed to broad market trends. That's critical when it comes to buying one stock over another.

How can I implement this strategy?

The simplest way to use the Zacks web site to identify such stocks is through the Zacks Stockscreener where you can look for companies for which the consensus estimate has been increased over the last few weeks or months. You can look for increases in the consensus EPS estimate for the current quarter, next quarter, for the current fiscal year or for the next fiscal year. Changes in estimates are especially significant when they occur over several quarters.

3. Follow changes in Brokerage Analyst Recommendations

Why should I use this strategy?

Lots of people will tell you when to buy, but Zacks will also tell you when to sell. Whenever an analyst downgrades his/her recommendation for any of the stocks in your portfolio, you may want to consider selling the stock. Also, stocks that have been recently upgraded by analysts are a good place to search for buys.

How can I implement this strategy?

Check the Zacks upgrades and downgrades list on a regular basis. Look for stocks that have recently been upgraded by one or more analysts and consider researching them. Also, track the stocks you own using the Zacks portfolio. When an analyst changes his/her recommendation on one of your stocks, you will be notified that day by e-mail alert.

4. Look at companies that report EPS surprises.

Why should I use this strategy?

When a company reports an EPS surprise (a quarterly EPS result that differs from the consensus estimate), the stock price usually reacts immediately. While this change is generally too fast for individual investors to exploit, the full impact of the EPS surprise tends to occur over the next few weeks. Analysts may do in-depth research to determine why their estimates were wrong, and based on what they find they may change their estimates for future quarters. These changes can have a long-term effect on the stock price.

How can I implement this strategy?

  • Use the Zacks Stockscreener to screen for stocks that have recently reported EPS surprises.
  • Monitor the Zacks Daily EPS Surprises list located in the Newsroom on Zacks.com.
5. Use the Zacks Rank for buy/sell decisions.

Why should I use this strategy?

Investing would be much simpler if every stock that received a strong earnings estimate increased in price. The truth is that while earnings estimate revisions are the leading indicator of a stock's future price moves, how you evaluate the estimate revisions and how you incorporate the recent EPS surprises into your evaluation is critical. Zacks has developed what we believe is the best technique for doing this, and we offer the results of our analysis in the Zacks Rank. The Zacks Rank assigns a rating to each stock ranging from 1 (Strong Buy) to 5 (Strong Sell).

How can I implement this strategy?

  • The Zacks Number One Ranked Stocks portfolio lists all the stocks that are currently ranked number one. This is a good starting point for further research.
  • The Zacks Rank is available as one of 96 screening items in the Zacks Stockscreener. By combining the Zacks Rank with your own in-depth research using the company research tools on the Zacks web site, you can zero-in on stocks with explosive potential.
  • The Zacks Rank is also one of the tools used by Ben Zacks to select stocks in both the Focus List Portfolio and the Timely Buys of the Month Portfolio.
6. Use the Zacks Focus List to enhance your portfolio performance.

Why should I use this strategy?

The Focus List is a select list of companies with excellent upside potential, picked directly by Ben Zacks. From its inception in March 1996 through 1998, the Zacks Focus List has shown a return of 157.2%.

How can I implement this strategy?

The Focus List is updated daily. By accessing the Zacks Advisor web site, you can check for additions to or deletions from the list and adjust your portfolio accordingly.

7. Combine the power of Zacks two best stock lists for even greater profits with "Timely Buys."

Why should I use this strategy?

Since most individual investors can't invest in all 60 to 70 stocks listed on the Focus, Zacks combines the best of the Focus List stocks and the best stocks from the Zacks Performance Rank. These are stocks that not only offer the profit potential needed to make the Focus List, but also have received top ranks on the Zacks Performance Ratings. This "super list" of 16-17 stocks is called "Timely Buys."

How can I implement this strategy?

You can access the "Timely Buys" portfolio through the Zacks Advisor homepage. These stocks are especially attractive at their current price levels, conform to the Zacks overall investment strategy and provide opportunities that will do far better than the average in the short-term!

This handful of companies represents less than .03% of all publicly traded stocks. It is one of the most exclusive lists on Wall Street. Since its inception in 1996, "Timely Buys" have returned a total of 479% vs. the S&P total return of 87.2% during the same period.

8. Go straight to the Stock Pick of the Month.

Why should I use this strategy?

If you want to narrow your choices down even further, and you want to know exactly what stocks to buy, then you'll truly appreciate this strategy.

The Stock Pick of the Month is the single most promising "timely buy" of the month, a stock with the greatest potential for price gain with the least risk. If an investor can buy just one stock in any given month, this is the one!

How can I implement this strategy?

You can access the Stock Pick of the Month through the Zacks Advisor service. You can also read Ben Zacks' commentary as to why this stock should see explosive earnings over the short-term.

9. Buy stocks recommended by All-Star Analysts.

Why should I use this strategy?

Each year Zacks and the Wall Street Journal identify the top analysts in each of 50 industries. There are two such lists of analysts published for each industry, the five top analysts based on the accuracy of their EPS estimates and the five top analysts based on the historical performance of their recommended stocks. These lists of analysts are provided on the Zacks web site.

How can I implement this strategy?

A current All-Star Analyst portfolio consisting of those stocks that are now recommended as a Buy or Strong Buy by at least three All-Star Analysts is maintained by Zacks at our web site. Normally

the portfolio will consist of 10-20 stocks. After selecting your initial portfolio from this list, enter your portfolio on the web site. You will then receive daily e-mail alerts telling you if any All-Star Analysts have lowered their recommendation for any of the companies in your portfolio. When this happens, sell the stock immediately and replace it with another All-Star Analyst recommendation selected from the All-Star Analyst portfolio displayed on the web site.

10. Own the Top Broker Buy List Stocks.

Why should I use this strategy?

Each month Zacks publishes the portfolio of 20-25 large cap stocks that appear on the "buy lists" of at least 3 brokerage firms. If you want to mimic this large cap portfolio that should outperform the S&P 500, this portfolio of " Top Buy List Stocks" is a good choice.

By owning these stocks, you will be benefiting from the combined marketing clout of the tens of thousands of brokers who are recommending these companies to their clients.

How can I implement this strategy?

To find a new stock to add to your portfolio, look at the list of "Top Firm Recommended Stocks" which is updated weekly on the Zacks Advisor site. We suggest that you sell a stock as soon as you receive an e-mail from Zacks saying that a brokerage firm has removed the stock from its buy list.

 
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