Zacks Investment Research specializes in the coverage of corporate earnings. And more importantly, how to profit from this information. So, today I'm going to share with you 3 proven strategies to profit from earnings announcements.
Strategy 1: Four Leading Indicators of Positive Earnings Surprises
I figured its best to get the most obvious strategy out of the way first. The 4 leading indicators I refer to are the 4 factors of the Zacks Rank. Before you skip this section, let me share some information with you that you may not have known.
In the mid-1970s, Len Zacks took his mathematical skills to Wall Street, where his job was to discover stock picking strategies that would beat the market. He had a simple theory that was the precursor to what became the Zacks Rank.
Len focused his research on finding stocks that were more likely to have a positive earnings surprise and jumping on the news. The journey led him to what we know as the 4 factors of the Zacks Rank. Each individually increases the odds of owning stocks that will enjoy a positive earnings surprise. However, when you combine them together inside the Zacks Rank, it becomes an almost obscene advantage for investors. (Learn more about 4 Factors of the Zacks Rank, in this video.)
Strategy 2: Stop the Bleeding
This second strategy is so simple, yet so hard for most investors to do. So, I'm going to beat it into your head...for your own good of course ;-)
Sell All Companies with a Negative Earnings Surprise
Yes, sell it immediately. Even after it falls at the open. Even if it is for a substantial loss. Why? Better to take a 10-20% loss in the short run than a 20 to 40% loss in the long run.
Strategy 3: Buy High and Sell Higher - Most Profitable Strategy
I saved the best for last. This strategy has proven to be the most profitable way to harness earnings surprises. This proprietary metric is called the Price Response Indicator, or PRI.
The PRI is amazingly accurate at saying which stocks will rise in the days following an earnings announcement and which won't. Proving the truism "Buy High and Sell Higher."
The scoring system for the PRI correlates the percent earnings surprise and short-term price reaction preceding the announcement. The model scores stocks from A to E with A's and B's being the most likely to increase in price in the days following the surprise. These signals are produced by our systems within hours after the company reports earnings.
At this time, the daily feed of PRI signals is only made available to our institutional clients. However, the Zacks Surprise Trader service filters down all the PRI signals with additional variables to find the 2% that have historically provided the best returns. From there we hand pick the signals, turning down 5 out of every 6 to provide our subscribers with a phenomenal opportunity to beat the market.
How phenomenal? Since inception in May 2006, Surprise Trader has generated a +16.0% return versus a devastating loss of -24.1% for the S&P 500. Just imagine how well it will perform when we finally leave this bear market behind.
Today is the perfect time to learn more about the Surprise Trader. Why? First, earnings season is coming into full swing. Second, the service has grown so popular that it closed to new members. We've reopened it briefly to give Zacks.com investors one more chance to get in. But we're closing the service again at midnight Saturday, July 11, 2009. This is your chance to avoid the Waiting List and also enjoy a substantial savings.
Learn more about Surprise Trader special offer >>
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