GUIDE. Zacks Investment Research, Inc. 111 North Canal Street, Suite 1101 Chicago Illinois

Transcription

1 GUIDE Zacks Investment Research, Inc. 111 North Canal Street, Suite 1101 Chicago Illinois

2 CONTENTS Introduction... 2 Section 1: How to Get Started... 3 Section 2: The Mental Aspect... 4 Section 3: Getting the Most Out of Zacks Value Investor... 6 Section 4: Follow the Leader... 7 Section 5: How to Read Zacks Value Investor Alerts... 8 Section 6: How to Read Zacks Value Investor Summary... 9 Section 7: Virtues of Money Management...10 Section 8: Tying it All Together

3 INTRODUCTION Value is not just an investing style. It s a way of life. Realize that there are people out there who would cheerfully buy a new TV for $2000 when the store down the street is selling it for $1295. If you get it, then we are going to be good friends for a long time. If not, then you might as well ask for a refund now and find an investment service that better suits you. Here is our game plan. We are going to find the best value stocks for the long haul. And we do that by combining 3 vital ingredients: Fundamental Momentum: We will look for companies where their earnings are exceeding expectations now and should continue to do so into the future. And the Zacks Rank is our best friend in this endeavor. Classic Value Principles: We will scour the landscape looking for stocks trading at 25%+ discount to peers. PE, PEG, Book Value and other metrics will be applied. Upside from Growth: If you buy a slow growth company trading at a 25% discount to peers, then once it goes up 25% the party is over. However, if you focus on growth stocks trading at a discount, then the profit opportunity over time is more like 50%, 100%, 200% and beyond. That is what we are looking for. We will provide you with market insights, education and great value picks. If finding value is part of who you are, then you have found a home with the Zacks Value Investor. Welcome aboard! Tracey Ryniec Editor, Zacks Value Investor 2

4 HOW TO GET STARTED At any given time the portfolio will have pre-existing recommendations. So the most common question with new members is about how to get started with these positions. This section will help you get on your way. 1. How Many Picks: First determine how many of the picks you intend to add to your portfolio. We recommend that you buy them all even if you have a smaller portfolio. Why? Because too often when customers pick and choose they often miss out on some of the biggest winners (it s a Murphy s Law kind of thing). Given that this is a long term service with little turnover means that commission costs will be very low with any online broker. So please strongly consider taking all the recommendations. 2. Green Doesn t Mean Buy and Buy and Buy : We are not believers in just buying and buying and buying shares if they are under their target price. That s because we believe in a diversified portfolio where no singular position takes up more than a 10-15% allocation. Thus, if you have already taken a position in a ZVI recommended stock and it s still in the Buy category then you are set. Look to add money to other positions on the list that are not already in your portfolio. Why? Because value investors have one really bad habit. And that is too often they keep buying shares on the dip. And too often they end up with their biggest position as the biggest dog in the portfolio (i.e. Sometimes stocks go down for good reason and you should not pick up more shares). So stick with the mantra of being diversified with your ZVI picks and using your money to add other, Buy rated recommendations. 3

5 THE MENTAL ASPECT To take a quote from Yogi Berra: Half of investing is 90% mental. It is important to realize how much investment success is related to what goes on between your ears. There are so many ways to get distracted and to question yourself while investing. You must be in the right frame of mind and have reasonable expectations to achieve success with this or any investment service. So be sure to pay attention to the tips in this section carefully; they will get you headed in the right direction. NOBODY IS 100% PERFECT First of all, there will be losing picks. Let me repeat: there will be losing picks. However, our aim will be to cut the losers early to minimize losses and let the winners run to maximize gains. In doing so, we can achieve fantastic results. A little known fact is that the Zacks Rank, even with its 26% annual return, is only right 56% of the time. We are extremely confident that over time we will produce substantial returns, but it is important that you learn to take the losing picks in stride. OUR BRAND OF VALUE INVESTING The Zacks Value Investor is unlike any service out there. Our system combines the proven power of the Zacks Rank with the discipline of value investing. Our research has shown this to be a phenomenally profitable combination. You see, we are value investors at heart. We believe that price and value are not the same thing. Mr. Market can overreact at times and present some wonderful buying opportunities. That s where we come in with cool heads and a long-term time horizon to scoop them up with both hands. Research has clearly shown time and again that the best performing stocks over the long haul are not growth stocks, but value stocks. Our extensive backtested research studies confirm this. Stocks with low prices relative to their earnings, cash flow, book value, or sales have shown significant outperformance over the long haul. And the lower the valuation metric, the greater the outperformance tends to be. Contrary to what you might occasionally hear in a bull market, valuation does matter. And it will matter a lot as we meticulously select winning stocks for the Zacks Value Investor portfolio. ZACKS RANK + VALUE INVESTING = A POWERFUL COMBINATION Of course some stocks are cheap for very good reasons, and low valuations alone are certainly no guarantee of high returns in the future. We ve all been guilty at one time or another of buying value traps or falling knives. But this is where the beauty of the Zacks Rank comes in. The Zacks Rank identifies companies with positive earnings estimate revisions. These stocks experiencing improving earnings outlooks have materially outperformed the market year-after- 4

6 year. But the Zacks Rank is completely blind to valuation metrics itself. When we combined the Zacks Rank with key valuation metrics in our research, the results were even more spectacular than looking for either one in isolation. Therefore, when we hunt for stocks with both strong earnings momentum and attractive valuations, we will grab less falling knives and more hidden gems. The market can sometimes take a while to catch onto these undervalued stocks, so be patient. Our targeted holding period is around one year. When we do happen to catch that falling knife, we will cut it loose early and look for other opportunities. By cutting our losers early and letting our winners ride, we fully expect to achieve market-beating returns over the long haul. Of course, not all of our winners are going to turn into multi-baggers like Priceline or Amazon. We expect to have many 25%, 50% and 100% gains. But we ll constantly be on the lookout for those extraordinary wealth building multi-bagger opportunities. 5

7 GETTING THE MOST OUT OF ZACKS VALUE INVESTOR It is our job to provide you with timely and profitable stock picks, but there are steps that you can take to ensure your success with Zacks Value Investor. Here are a few things you can do to get the most out of the product. 1. Read this guide carefully This guide is your friend. It has valuable information on how to use the product and succeed with the assistance of Zacks Value Investor. It gives you step-by-step instructions on how to receive alerts and what to do when you receive them. It has important money management tips. 2. Have a working address This is necessary to receive trading alerts. Make sure you can access your in a timely fashion because acting on trades is essential to success. The Summary s will be sent around 8:00 p.m. EST, which summarizes the positions as well as what happened on Wall Street. Intra-day trading alerts, while rare, will typically be sent within the first hours of the trading day. Unfortunately, many Internet service providers have software programs that filter out s you want to receive, like Zacks Value Investor Summaries. To get optimal delivery of our s follow this link for quick and easy instructions. 3. Have an online trading account We do not promote any particular company for this, but ideally lower commissions will help you achieve higher overall returns. You will make several trades a month, and high commissions can really eat into your profit margins, especially if you have limited capital. 4. Access the site To access the site, go to and enter your username and password. This will take you to the main page where you can view the portfolio, any pending trades, and the commentary. 6

8 FOLLOW THE LEADER The process to receive our trades is very simple, yet we feel it is so important that we are going to spell it out for you. Here are the four steps Receive the with the summary or intra-day signal Read the to determine appropriate action Place trades through your broker with the opporpirate % allotted Follow the s to determine when to sell Subscribers who realize the highest returns follow all of the recommendations, and those who do the worst try and cherry pick which buy signals to act on and which to pass on. Follow the signals and you ll maximize your opportunity for success. ACT PROMPTLY = MOST SUCCESS And if you don t beat the market, you can take advantage of our 100% Money Back Guarantee. SPEAKING OF THE GUARANTEE We feel that if we are not able to live up to our word and help you beat the market then we shouldn t be deemed worthy enough to take your money. So in addition to the 90-day, no hassle guarantee, there is a 100% Money Back Performance Guarantee. There are a few conditions that have to be met first, but the bottom line is that we have to perform. Click here for details. 7

9 HOW TO READ ZACKS VALUE INVESTOR ALERTS From time to time, this strategy will have a trading alert during the trading day. When a Buy Alert or Sell Alert is sent out, you should receive the alert within the first hours of the trading day detailing what stock is being added or sold and the rationale behind the move. It is important that you act as soon as you can. Here is an example: Signal = The type of alert. It will be a green ball for a buy alert or a red ball for a sell. Company Name = The name of the company that is being added to or sold from the Zacks Value Investor portfolio. Symbol = Ticker symbol of stock being added to or deleted from the portfolio. Date Added = The date on which the stock was added to the portfolio. The alert will also show the current price at which the stock is trading, as well as the market cap and industry of the recommendation. Zacks Value Investor Portfolio Commentary = As part of the alert, Tracey will explain her rationale for the addition. You will learn her reasoning for adding or selling the stock. Intraday alerts use the average of the price at the time of the alert and the closing price that day. 8

10 HOW TO READ ZACKS VALUE INVESTOR SUMMARY The Summary provides a wide array of details for the Zacks Value Investor. This summary may have new signals as well as the current open portfolio with commentary. This is valuable information as it conveys what our game plan is, why we are in each stock, when to get out and why, as well as any relevant news. This is ed to you around 8:00 p.m. EST. In regards to the price added for the portfolio, Zacks uses the average of the price at the open and the closing price on the day the stock is added and deleted. 9

11 VIRTUES OF MONEY MANAGEMENT Money management can be the difference between realizing large gains and going broke, even if the winning percentage is the same. How can this be? The key point is that winning investors know to ride their winners and cut their losses quickly, and stick with a plan that has proven to work in the past. Here are a few rules that you can follow to further improve your returns: First of all, don t dump your entire portfolio into these Zacks Value Investor picks. Only allocate that portion of your capital that can be comfortably devoted to speculation. This portfolio will typically hold positions. You should be able to sleep soundly and act rationally if you are only trading with your speculative money. Keep in mind that reinvesting profits and the power of compounding are your friends in this portfolio. EVER-PRESENT CLICHÉ RINGS TRUE It has been said millions of times before, but it is so important it needs to be said again: Don t put all your eggs in one basket. Even if you are the most brilliant investor in the world, there is no way of knowing for sure that an investment will go your way. There will be losing trades. The key is staying in the game and building your equity over time in a systematic way. This can only be done when diversification is put to use. Not that we have to remind you, but the main point is that your capital was earned through years and years of hard work. Capital conservation sounds boring, but without it, you are fighting a losing battle. We don t want to see the money you have put your blood, sweat, and tears into evaporate due to lack of discipline. 10

12 TYING IT ALL TOGETHER It is our goal at Zacks to enhance your investing results via the Zacks Value Investor service. This booklet touches upon the details of the service and provides several useful tips to realize the vast potential that these stocks hold. We feel it is our job to let you know that we arehere to help you get the most out of Zacks Value Investor. Again, let s go over some of the important points made in this booklet. Zacks Rank + Value Investing = A Powerful Combination Not Every Trade Will Be A Winner Timeliness Is Of The Essence Money Management Matters Greatly Have A Working Address We Are Here To Help The last point is important as we have free customer support that should be taken advantage of. Any additional questions that you may have can be answered by just picking up the phone and giving us a call or ing us: (Outside the US, ) valueinvestor@zacks.com Value Investor disclosure information 11