Rating: 
Summary: Learning from Sell-Side Security Analysts
Review: 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?
Rating:
Summary: Learning from Sell-Side Security Analysts
Review: 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?
Rating:
Summary: Very useful for investors and swing traders alike.
Review: The path to superior returns in the stock market is to anticipate changes in investor expectations. The multi-million question is how to do that. An investor needs to realize the market is made up of 2 broad groups: retail investors (little guys like you and me) and big insitutions (mutual funds, insurance companies, hedge funds, etc.). Big institutions drive market movements. The people responsible for these market movements have the same professional training, and tend to think alike. They focus primarily on reports provided by the analysts at major brokerages. Many novice retail investors look at an analyst recommendation and mistakenly believe it is profitable to act on it. This book demonstrates why this is the way to the poorhouse. Even though analyst recommendations are worthless, analysts do provide very profitable info--if you know how to use it. If you look for changes in earnings estimates (upward or downward), you will be able to profitably anticipate the actions of the big guys--who typically chase after earnings momentum. A positive revision will typically send the stock higher for 1-3 months, making such stocks profitable long candidates for shorter-term traders. Likewise, negative earnings revisions are good short candidates. Incorporate this fundamental framework with preferred technical screening, trade entry, and exit criteria, and you can develop a very reliable and profitable trading system regardless of market direction. The book will also educate you on the pressures analysts are under to remain positive about a stock despite the fact fundamentals suggest the company is a poor investment. The situation will not change, despite government action to correct it, since there really isn't any incentive for major brokerage analysts to be honest. They have much more to lose than to gain by issuing more sell recommendations. The stock buyer should beware.
Rating: 
Summary: I'm sorry but this is mostly amusing to me personally
Review: There are two things which tickle me about this book. One is the sample Zack's report at the back which has a strong buy #1 rating on a -.3% return on equity stock. The other is the section on practical use of the system. It, of course, is for any type of investor including long term investors even though the effects that the system measures lasts only for 1 - 3 months. And don't forget about growth investors and value investors either. This section is so short as to be laughable. Also notice that in the 2002 A list there were 216 stocks. Most are going to have to buy a subset. But what subset? No info is provided on the performance of typical subsets for each investor class. Perhaps an MVO addict or a Monte Carlo hack would have the answer.
Rating:
Summary: I'm sorry but this is mostly amusing to me personally
Review: There are two things which tickle me about this book. One is the sample Zack's report at the back which has a strong buy #1 rating on a -.3% return on equity stock. The other is the section on practical use of the system. It, of course, is for any type of investor including long term investors even though the effects that the system measures lasts only for 1 - 3 months. And don't forget about growth investors and value investors either. This section is so short as to be laughable. Also notice that in the 2002 A list there were 216 stocks. Most are going to have to buy a subset. But what subset? No info is provided on the performance of typical subsets for each investor class. Perhaps an MVO addict or a Monte Carlo hack would have the answer.
Rating:
Summary: How to best use analyst earnings estimates to your advantage
Review: This engagingly written book discusses the merits of the endless flood of reports put out by equities analysts. Since the author is well trained with an economics degree from Yale and a MBA in Analytic Finance from the University of Chicago, he understands that they are worth more as marketing tools than as actual guidance for an investor. Mr. Zacks, who is also an investment columnist, explains carefully how and why analyst reports are biased and certainly cannot be taken at face value. He explains that most analysts work for investment banks that depend on further customer business for their livelihood. In fact, the investment banking fees are the way they earn the bulk of their money. Therefore, they are very careful to not bite too hard on the hand that feeds them. Analysts also work to build their reputation and tend towards a herd mentality that avoids taking the risk of being wrong alone. It is safer to be wrong as part of a group than make a bold prediction and left twisting alone in the wind. It isn't that investment banks necessarily tell their analysts to fabricate their reports or that analysts are sworn members of some secret cabal. It is simple natural selection. Analysts who are perceived as working against their firm's interests or who are boldly wrong and cost their customers large sums of money are going to lose their position in the industry and move on to other occupations. So, why pay any attention to analyst reports? Why not ignore them altogether? Because analysts have access to a lot of valuable information that is difficult and costly for the average investor to acquire independently and you want to use it to your own benefit. While the book discusses several approaches and strategies, the core of its approach is the estimate of earnings provided in these reports. And more than that, not the earnings estimates themselves, but the CHANGES in earnings estimates. According to the data Mr. Zacks provides, when analysts increase their earnings estimates it is a signal to buy because there are likely to be further upward revisions (owing to the conservative nature of analysts to not make bold predictions). Conversely, downward revisions are sell signals. Mr. Zacks also discusses the role or the Earnings Surprise and the Sales Surprise as predictors in certain strategies. While the book provides the methods and calculations you can do on your own in order to find and track stocks according to the approaches described in the book, Mr. Zacks has a for fee service (it is less than a buck a day) that tracks thousands of stocks and ranks them for you daily. The book gives you a code for a one-month trial to the service. The service also provides rankings for the stocks that are based on the methods described in the book. The strategies outlined in the book can lead to a great deal of trading, but not necessarily so. And Mr. Zacks cautions against trading too much and avoiding letting transactions costs swallow up your returns. He also points out that the trading approach described here really require a minimum of $25,000 to invest in order to provide sufficient diversification. Less than that you should simply stick with index funds. If you are the kind of person who wants to build and manage your own portfolio rather than investing in funds or indexes, this is an interesting approach that might serve you well. Of course, the trick is in the implementation. I found the book interesting and though provoking and would be interested in any comments you might have. Feel free to email me.
Rating:
Summary: How to best use analyst earnings estimates to your advantage
Review: This engagingly written book discusses the merits of the endless flood of reports put out by equities analysts. Since the author is well trained with an economics degree from Yale and a MBA in Analytic Finance from the University of Chicago, he understands that they are worth more as marketing tools than as actual guidance for an investor. Mr. Zacks, who is also an investment columnist, explains carefully how and why analyst reports are biased and certainly cannot be taken at face value. He explains that most analysts work for investment banks that depend on further customer business for their livelihood. In fact, the investment banking fees are the way they earn the bulk of their money. Therefore, they are very careful to not bite too hard on the hand that feeds them. Analysts also work to build their reputation and tend towards a herd mentality that avoids taking the risk of being wrong alone. It is safer to be wrong as part of a group than make a bold prediction and left twisting alone in the wind. It isn't that investment banks necessarily tell their analysts to fabricate their reports or that analysts are sworn members of some secret cabal. It is simple natural selection. Analysts who are perceived as working against their firm's interests or who are boldly wrong and cost their customers large sums of money are going to lose their position in the industry and move on to other occupations. So, why pay any attention to analyst reports? Why not ignore them altogether? Because analysts have access to a lot of valuable information that is difficult and costly for the average investor to acquire independently and you want to use it to your own benefit. While the book discusses several approaches and strategies, the core of its approach is the estimate of earnings provided in these reports. And more than that, not the earnings estimates themselves, but the CHANGES in earnings estimates. According to the data Mr. Zacks provides, when analysts increase their earnings estimates it is a signal to buy because there are likely to be further upward revisions (owing to the conservative nature of analysts to not make bold predictions). Conversely, downward revisions are sell signals. Mr. Zacks also discusses the role or the Earnings Surprise and the Sales Surprise as predictors in certain strategies. While the book provides the methods and calculations you can do on your own in order to find and track stocks according to the approaches described in the book, Mr. Zacks has a for fee service (it is less than a buck a day) that tracks thousands of stocks and ranks them for you daily. The book gives you a code for a one-month trial to the service. The service also provides rankings for the stocks that are based on the methods described in the book. The strategies outlined in the book can lead to a great deal of trading, but not necessarily so. And Mr. Zacks cautions against trading too much and avoiding letting transactions costs swallow up your returns. He also points out that the trading approach described here really require a minimum of $25,000 to invest in order to provide sufficient diversification. Less than that you should simply stick with index funds. If you are the kind of person who wants to build and manage your own portfolio rather than investing in funds or indexes, this is an interesting approach that might serve you well. Of course, the trick is in the implementation. I found the book interesting and though provoking and would be interested in any comments you might have. Feel free to email me.
Rating:
Summary: Fantastic book
Review: This is a great book in the world of how analyst work. As I read this book, I began to understand from my past experiences and news about Henry Blodget, Siria (sp?) and why Henry got fired and how they gave ridiculous recommendations and how Henry getting sued. It all made a lot of sense now. The strategy in this book makes a lot of sense. I can't wait until my next paycheck and try out the techniques.
Rating:
Summary: Fantastic book
Review: This is a great book in the world of how analyst work. As I read this book, I began to understand from my past experiences and news about Henry Blodget, Siria (sp?) and why Henry got fired and how they gave ridiculous recommendations and how Henry getting sued. It all made a lot of sense now. The strategy in this book makes a lot of sense. I can't wait until my next paycheck and try out the techniques.
Rating:
Summary: Earnings Matter for 300 pages
Review: This is a marketing ad for Zack's and the only thing the book offers is that earnings matter (past, present and future) and oh yes Zack's algorithm is the best so subscribe.
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