Ahead of the Market: The Zacks Method for Spotting Stocks Early -- In Any Economy [Hardcover]

Mitch Zacks (Author), Mitchel Zacks (Author)

Book Description

Publication Date: March 18, 2003

Beat the Pros at Their Own Game

All too often, you learn about good stocks far too late to profit from the information. By the time you actually buy a stock, professional investors have already been there, bought the stock, driven up the price, and are just waiting to unload it at an inflated price.

All That's About to Change. . . .

In Ahead of the Market, Mitch Zacks shows investors how they can spot stocks that are poised to take off long before the rest of the crowd learns about them. How? By unlocking the gems of priceless information buried in Wall Street's often self-serving research.

Ahead of the Market is the first book, ever, that enables you to profitably use the analyst stock research for which Wall Street firms pay more than one billion dollars annually. Many investors have rightly felt misled in the past by analysts who continued to hype stocks as prices plummeted. You may have even concluded that Wall Street research is totally worthless. But it's not.

In Ahead of the Market, Mitch Zacks shows that analysts actually provide a wealth of market-moving information that can generate exceptional returns if interpreted correctly. The key is to use the research produced by Wall Street analysts the same way the professional money managers do.

Pioneered by the firm Zacks Investment Research and based on more than twenty years of intensive analysis, the investment strategies revealed in this book are indeed the same ones used by successful professional investors everywhere.

In these pages you will learn how to form an investment plan by locating stocks that are poised for price appreciation and avoiding stocks heading for a fall. Zacks shows how you could have prevented being burned when the recent bubble burst, if you had known how to use analyst research correctly and teaches you the rules of the research game so you will not fall victim the next time around. In sum, this book is your guide to picking the right stock at the right time.

Mitch Zacks's groundbreaking research provides new insights and new strategies to:

• Use revisions to analysts' earnings estimates to predict the rise and fall of stock prices
• Interpret the real meaning behind analysts' stock recommendations
• Employ the "cockroach" phenomenon and other methodologies to predict earnings surprises before they occur
• Determine how to react when a company reports earnings and how to profit from "post-earnings announcement drift"
• Understand and profit from "analyst creep" -- the reason that earnings estimate revisions occur incrementally over time
• Avoid being duped by the games that companies play with their earnings reports

Whether the economy is healthy or stalled, whether the market is up or down, by focusing on the strategies contained in this book you will always come out ahead. Well-picked individual stocks will always carry the day. Now with Ahead of the Market, you will finally have the same tools institutional investors have and will be able to find great stocks in any market environment.

Editorial Reviews

From Publishers Weekly

Wall Street spends over $1 billion a year analyzing stocks. Too bad much of that analysis is garbage, says author Zacks. He should know: he's v-p of the respected firm Zacks Investment Research, and he's witnessed how the cozy relationship between companies and their investment bankers have corrupted investing over the years. Now he's come out with not only a denunciation of sketchy analysts, but a handbook for individual investors for spotting winning stocks on their own. (A hint: it's all about the earnings estimates; firms whose projected earnings are being revised upwards are the ones to bet on.) Zacks's prose is crisp and swift, and he tackles tricky subjects with dispatch. Sometimes the book veers into an advertisement for the firm and its Web site, but the trove of clear-headed market wisdom is well worth the occasional self-promotion.
Copyright 2003 Reed Business Information, Inc.

Review

These pages contain a wealth of interesting and clearly presented material (Burton Malkiel, author of A Random Walk Down Wall Street )

“reveals a little-known but clear roadmap for utilizing Wall Street research in a way that significantly enhances investment performance.” (Bernie Schaeffer, Chairman and CEO, Schaeffer's Investment Research, Inc. )

The investment strategies in this book can put any investor ahead of the market. (Dan Miller, Business editor, Chicago Sun-Times )

This is the one book every savvy investor must have if they want to out-wit Wall Street’s pros (Paul B. Farrell, columnist, CBS MarketWatch )

Here investors learn how to understand analysts’ recommendations and other market indicators in a way that really lets them profit. (Steven M.H. Wallman, foliofn, former SEC chairman )

This masterpiece will live forever...a beautiful distillation of unobtrusive knowledge. (Victor Niederhoffer, author of The Education of a Speculator )

“A no-nonsense practical guide on how to profit from the analyst estimate game.” (Jim Oberweis, portfolio manager, Oberweis Asset Management )

See all Editorial Reviews

Product Details

• Hardcover: 304 pages
• Publisher: HarperBusiness; 1 edition (March 18, 2003)
• Language: English
• ISBN-10: 0060099682
• ISBN-13: 978-0060099688
• Product Dimensions: 9 x 5.9 x 1.1 inches
• Shipping Weight: 8 ounces
• Average Customer Review: 4.2 out of 5 stars  See all reviews (20 customer reviews)
• Amazon Best Sellers Rank: #1,433,865 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

64 of 66 people found the following review helpful:

5.0 out of 5 stars Learning from Sell-Side Security Analysts, July 7, 2003

By 

Donald Mitchell "Jesus Loves You!" (Thanks for Providing My Reviews over 109,000 Helpful Votes Globally) - See all my reviews
(VINE VOICE)    (HALL OF FAME REVIEWER)    (TOP 100 REVIEWER)   

This review is from: Ahead of the Market: The Zacks Method for Spotting Stocks Early -- In Any Economy (Hardcover)

In recent years, many authors have attempted to describe how sell-side (brokerage firm) analysts develop their research and how institutional investors use that information. Ahead of the Market is the best of that breed in describing the inherent conflicts of interest in providing advice that is only half paid for by brokerage commissions. The rest of the money has to come from investment banking fees . . . and you get those for toadying up to the companies you cover. The individual investor is often victimized in the process. Some of the especially valuable parts of the book are tables and statistics that document the issues Mr. Zacks describes. Along the way, you will learn how you should read a sell-side analyst report, and interpret what is and is not saying.

The book deserves a five-star rating for its performance in shedding helpful light on this important subject for individual investors.

The book has another purpose . . . to help you find stocks to buy. Basically, that approach is to look for companies whose sell-side e.p.s. estimates keep creeping up, and whose analyst ratings are rising.

Here the book is much less successful, and I would caution you to follow its advice very conservatively. Basically, these "signals" are primarily helpful for short-term timing of whether to pick stock A or stock B when both look equally attractive to buy or sell.

Before you reject my warning, let me caution you that many of the charts that support the Zacks Method in the book are a little misleading. First, the Zacks universe includes mostly small cap companies, yet almost all the examples compare results to the S&P 500, a predominately large cap index. So you are comparing apples and oranges. Second, the comparisons look at stock-price change rather than total return (stock-price change plus dividends). The S&P 500 stocks usually pay dividends while smaller cap stocks often do not. That can make the Zacks results look better than they are. Third, to continually buy and sell the Zacks #1 list means owning around 200 stocks all of the time. Is your portfolio large enough to do that? Fourth, tax effects are ignored. That's all right if you are dealing with a pension account, but not if you are using personal money outside of a tax-deferred account. If you trade stocks in less than the capital gains period, you pay full marginal income tax rates (which often include alternative minimum tax hits). If you hold for longer than the capital gains period, your maximum federal rate is 15%. Dividends have a similarly favorable treatment over short-term stock-price gains. Fifth, these ratings can change daily. Do you have the time or interest to track and trade almost every business day of the year? Sixth, the exceptions that Mr. Zacks encourages you to follow are reasonably complicated. Can you understand and remember them all? Seventh, many of the companies being scanned only have one analyst following them. The universe of companies being covered by a reasonable number of competent analysts is quite small, and is mostly comprised of companies whose stocks are not going to grow very fast. There are other problems, but I will not bore you with them. Just note that the insights are of less potential value to you than the raw exhibits suggest.

Personally, I find the Zacks e.p.s. estimates to be one of several helpful inputs to check before buying and selling a stock. One reason I like to look at the information is to check if my perceptions of the situation need to be further verified with more research. I often find that that is the case. So Zacks information has helped me avoid mistakes in the past, and will probably do so again.

I got a lot of benefit from the detail in the book about how to use the Zacks web site, which I find hard to navigate.

Before finishing this review, I should mention that the Zacks data on companies are very high quality and are constantly being improved. Any misleading comparisons could have been overcome by merely selecting different ways to interrogate the data base. Hopefully, this book will go into another printing or edition, and some of these changes can be made. I share my comments in the spirit of helping with the optimum display of this information.

The book is conveniently organized for a quick scan, or a quick revisit of key sections. Materials are summarized in a number of different ways including within the text, at the end of chapters, and in the book's conclusion beginning on page 244.

After you finish reading and thinking about this book, consider where else in your life you get information that is mostly "paid for" by someone else for a different purpose. How could your best interests be in danger in those situations, too?

28 of 30 people found the following review helpful:

5.0 out of 5 stars Very Good, March 28, 2003

By A Customer

This review is from: Ahead of the Market: The Zacks Method for Spotting Stocks Early -- In Any Economy (Hardcover)

I am a financial advisor. Several years ago, doing my own research, I discovered that earnings estimates trends have a much higher correlation with stock prices than do reported earnings. The future value of a stock is in large part determined by its future stream of income (earnings). I was compounding my account around 50%/year from 1997 - 2001 but was somewhat skeptical whether I could continue to do this for 10 years or more. I thought I was onto a good stock picking method but that this method may not work in future market conditions. At the end of 2001 I discovered the Zacks philosophy and their reported returns for the Zacks #1 ranked stocks (34% annual gains since 1980). Wow, now that excited me. My system is fairly similar to Zacks ranking system so, just maybe I can continue to do this into the next decade or two or three! This book is worth the read. Forget about picking stocks based on "static" measures such as looking at balance sheets and income statements. This does not work. You much be more intuitive and the Zacks rank helps simplify this.
Rob

21 of 22 people found the following review helpful:

3.0 out of 5 stars And the meat is still in Zacks' own pocket, February 14, 2004

By 

ServantofGod - See all my reviews

This review is from: Ahead of the Market: The Zacks Method for Spotting Stocks Early -- In Any Economy (Hardcover)

With recommendations on the back cover from John Bollinger, Burton Malkiel and Victor Niederhoffer, I did have high expectation on this book but I had been a little bit disappointed. The recommendation or the content is very straightforward. As concluded by the author, they include 1) buy stocks that are receiving upward earnings estimate revisions and sell stocks that are receiving downward earnings estimate revisions owing to "analyst creep" and delayed price response. 2) buy companies that are reporting earnings better than expectations and avoid companies that are reporting earnings worse than expectations owing to post earnings announcement drift and "cockroach effect". 3) subscribe the Zacks Rank, which somebody did the homework of the above for you with a fee 4) focus on changes in analysts' recommendations over time. The catch is: I doubt only a very small percentage of home investors have the time or resources to execute any one of the recommendations above for long and as a result they can only go to Zacks Investment Research for help, and thus bringing the whole book to something not far from a sales talk.

In short, if you are already aware of the innate problem with any analysts' recommendation and you are not going to subscribe to any fee based research, this book is not for you. However, if you are a green hand in the investment game, prepared to shop for a research report and pick the stocks yourself, this book may still worth a read.