Zack's Research Wizard 6 months later
It's been nearly 6 months that I've been using Zack's Research Wizard and I'm starting to regret my decision. The screener is still a very powerful tool, but I'm relying on it less and less as I learn more screening and analysis techniques.
I think the thing that I've struggled with most is the support that I've received from Zack's. The salesmen assured me before I purchased RW that they would design screens around my ideas. I've given them qualifiers a couple of times and I have not heard back from them for four months. Not a peep.
There is a real lack of support for such an expensive product. I think it would really help to have a user forum available. Any sort of communication on a weekly basis would be great.
I truly think that RW is a great product. It has a lot of cool features--the backtesting ability (as flawed as it may be) is unique among stock screeners.
But I'm finding other screeners that are just as neat for far less money. I think I'm going to let my subscription run out in another 6 months.
Posts
68 comments:
Hey scott, what other screeners have you found that are better? What are the flaws with the backtesting?
Thanks!
I've found Telechart and Stocktables give me all the information I need at a reasonable price.
The flaws are mentioned in other posts but seem to be concentrated on survivor bias and skimpy amounts of data (two years for the cheaper version of RW).
i have found most of the canned screens failing in this market. but your custom RW screen is outperforming your other ones. so why would you be disappointed, scott?
I feel that my "To the Moon" screen is being carried by stocks from other screening sources. Maybe I haven't given things enough time. I guess my main beef is with the lack of communication and community surrounding Research Wizard. It's hard to feel like I'm learning when there is no feedback.
You can get Zacks data and online screening tool for $100 annually. The extra $1,500 you're paying for RW is, for the most part, the backtester.
Please tell us where!
Whoops--sorry for the bad info. When I renewed at Zacks a few months ago it was $300 for 3 years. Now it's either $199 per year or 24.95 per month.
I'm glad that I found your post; it's the only post I've found of
anyone using the Research Wizard. I'm having trouble deciding whether
to subscribe--it's expensive, and the survivor bias (which I'd never
heard of until I read your blog) is another minus. I got an email from
them saying that their price is going up $200, that I can lock in the
lower price if I subscribe, and that they typically have two to three
price increases per year but guarantee that I will always be able to
renew at the price I pay for the first year. And neither the web site
nor any of the emails seem to give the current price. It feels like
high-pressure sales, which annoys me.
It does have more screens than the lower-priced Zacks screener, and
I don't know of any way to download Zacks Rank data other than with
the Research Wizard (although my understanding is that it is purely
derived from fundamentals, so, in theory, it should be possible to get
similar results with a good data set.) I wish I knew of a way to obtain
good historical data. I may take a look at Stockwiz again; I believe
they include historical fundamental as well as price data. I'd like to
look at all my options before spending a lot of money on anything...
I'm very skeptical of companies who warn that prices are going up. I think RW has been about the same price for the last few years but they are ALWAYS about to raise their price (they seem to do that with all of their products which annoys me too).
You can get Zack's rankings by subscribing to Zack's Elite (I think that's what it's called). I've used it for the last couple of years by just typing in a portfolio and looking at the rankings online. It's updated every morning so the info is current. I plan to subscribe again when my RW subscription runs out. RW is a way too expensive way to obtain the ranking.
I have a ZacksElite subscription; it just doesn't help with
back-testing since you can only get the rank as of today. I'm
starting to agree with the poster who said that the back-testing
is the main thing you're paying for with the RW subscription.
I looked around a bit and found several places that might let
me download historical end-of-day quotes but not fundamentals.
So I wonder if subscribing to RW is the only way to be able to
do automated back-testing using fundamentals.
In any case, I think that I'll just stick with my ZacksElite
subscription for now. Playing around with rw would be fun
but probably not worth the money, especially where I can't
entirely trust the back-test results. :(
iam a "mere mortal" in trading and iam having hard time finding the right system/strategy to buy.iam glad i found this blog on zacks software i was just about to buy the whole package but from your coments it seems wise to only buy the Zack's rankings by subscribing to Zack's Elite. Has anyone heard of Quatnum Swing Trader(by Bill Poulos)??? , i have seen many reviews on the net singing praises about it. Anyone heard of it???? any comest on it??
I am certainly glad I found StockPunk. I am interested in the software but frustrated that the sellers do not say what it would cost to subscribe after the 2 week free trial. Now I see that service and feedback are lacking, too. Not very inviting!
I've been trying out Zacks RW a couple of times now, just by using different e-mail adresses. Only backtesting is limited to two years. But it gives me time to try out different strategies and see the results when backtesting. I've also tried the zacks screening tool, but this is not as complete as the RW. So, I'm still continuing with the trial versions, because I'm also annoyed by the high pressure sales. And of course it's way overprized.
At the moment I'm trying out my modified version of filtered zack ranks#1, which gives good results when backtesting(160% for last year). I'm using papermoney to try this strategy for about a year and it looks promising sofar, even with the market down, the last couple of month. I can’t do this screening with the online screening tools, so I’ll have to either buy the program, or continue with the trial versions. Unless, there is another program, that can do the same for less money.
I used Zacks Research Wizard for the last 9 months and I am soooo disappointed. This survivorship bias is killing me. There is almost no customer service and that is why it took me several months to come up with screens having good returns. but then I tried it in real life and it did not work. Stay away from Research Wizard
Thanks Scott for StockPunk. This blog has the only independent information I have found about Zacks Research Wizard.
I have tried both AAII Stock Investor Pro and Zacks Research Wizard. I recommend Stock Investor Pro, but I DO NOT recommend Zacks Research Wizard. I agree with all the comments concerning the Research Wizard about lack of customer support, unclear pricing, way too expensive, promising more that what is actually delivered, survivorship bias, etc., etc. When I have contacted AAII with questions, I have gotten very quick answers. Also, AAII has a lot of local user groups.
Research Wizard could be a fabulous product, but I have a problem with it that no one else has talked about. I have tried a number of different screens. I have been trying out a modified version of the filtered Zacks rank (I see that Kees in a February 15, 2008 post is trying something similar). The problem I have found is that sometimes Zacks changes data after the fact. One of the screens I tried pulled up a number of different stocks last week. One of them ended up losing over 20% last week. However, the latest backtesting database replaced that stock with one that gained over 8%. This is a HUGE problem IMHO. This means you can't trust the screening tool for current stock picks, or the results from backtesting! Completely unacceptable.
I'm always looking for good backtesting programs. I went to a local users group for VectorVest. I don't like the hype selling around the product (same problem with Zacks), but maybe the backtesting with the standard product is possibly useful. Has anyone had any experience with VectorVest backtesting? Thanks again Scott for this great forum.
I subscribed to RW for three years. I spent hundreds of hours developing what seemed to be robust, well founded systems using the backtester. I too found out that their service relies on bad data. I traded for a couple of years with real money and kept meticulous records. I would look back at my trades and was surprised to see that RW showed a large percent of stock selections as different from what it selected in real time. Holy crap! Big waste of time and money for me. When I switched to Portfolio 123.com, I finally was able to develop systems that were based on reality and have been making very nice returns. Plus you subscribe on a month-to-month basis. I got burned also with Zacks Surprise Trader. My best advice is to not waste your time and money on any of the higher dollar Zacks products. If you are still tempted, read between the lines in their claims and promises.
I have used Vector Vest for 6+ years and like it BUT
1 I never believe the results of the backtests - they are only good for comparing one strategy with another - not for determining how much you may make or lose in the future
2 Local user group support is very good
3 They have a great Yahoo group --- also check out the holygrailsm yahoo group and phillips ramblings--http://finance.groups.yahoo.com/group/holygrailsm/ and http://finance.groups.yahoo.com/group/PHILLIPS-Rambling/
4 Portfolio123 is also a good program as is AAII, software - but the support for these two is not as good in my opinion as V Vest.
(1) Back testing (BT) is as good as you program it to be. If your trading strategy is known, and you make sure that the entry prices used in BT are always the “Market-On-Close” Prices (MOC’s) after you screen, and you apply this to your exit prices as well, your BT will give a pretty reliable historical return overview. Zack’s Research Wizard (RW) calculates the returns on the assumption that you can buy the stocks on Mondays for the closing prices of the preceding Fridays. For one of my own trading strategies, purely based on a small selection of the 600+ fundamentals of RW, this implied that RW’s BT would have given me a whopping 14% YTD whereas, what I do in reality, consistently buy and sell on closing Mondays, my own programmed BT gives me the realistic YTD return of 1%.
(2) Of the 8200 stocks daily updated in the databases of Vector Vest and Zacks, a few per week get delisted as well a few get listed. In addition a few per day change ticker symbols. Hence, for sure, when I screened for my 20+ stocks back in January, I will find some five different ones if I apply the same screening in today’s updated database. However, when your trading strategy selects more than just a few stocks, it will select a stock of similar strength based on the same selection rules, which will generally lead to overall similar returns.
(3) Once in a while a company may pay a relatively large dividend to compensate its share owners for a large overnight stock depreciation due to a merger, split up of the company or any other reason. The BT’s that I have seen don’t always properly account for such high payouts, but there is no fundamental reason not to include these big payouts in the BT algorithms.
(4) Last but not least, the forecasting capabilities of BT. In this respect, I can’t help to comparing this to the trend analyses used in clinical investigations in the healthcare industry. The larger your sample and time span, the more reliable gets the forecasting probability. Hence, I think that if your trend analysis is only based on, say, the past trailing year of historical financial data, it will be pretty hard to find trading strategies that are robust against the present bearish period of the past half year. If it were that easy, wouldn’t GTE, CWEI, and WLT be almost sure bets against the odds of the current market?
Unfortunately back testing does not guarantee that future results will duplicate the testet results. We all know that. Both Wizard and Vector Vest are in the same ballpark. What might be learned is how to evaluate a trading or investing idea using fundamental studies in combination. So either VV or RW are vehicles to be used to try ideas that may be useful in making money. Money is the answer. We who have not matured as financial money makers are looking for ways to get a quick fix.
I purchased RW 2 weeks ago. Bought 6 yrs of data. Up 6x what I paid. Could lose it all in a day. I must learn,somehow, how to trade (invest). Am up for the year (8%) with Spire, like MPtrader.comfor day trading. Must study, perhaps combine approaches. Will look into AAII.
I appreciate those who take the time to post.
Thanks Scott.
Ed Dalton eddalton@cox.net
On June 12, I posted that GTE, CWEI and WLT would be almost sure bets if you base your trend analysis on the past trailing year (of 250 business days). In reality, these three stocks were having some of the most consistent daily gains for the past 160 business days out of a selection of some 8200 stocks. It took me by surprise that after a miserable week with the markets going down by 2-4%, all three stocks went on moving upwards with each one having a return of roughly 7% in just 6 business days. Is that sheer luck?
VV seems to base its Relative Timing on consistent behavior over one year to indicate a strong trend. Most of the Technical Analysis seems to base its patterns on 14 to 50 business days. RW allows you to program consistency in your screens of up to about 52 weeks and back test that for eight years when your license allows you to give access to the so-called static database. One of the most successful hedge funds, Renaissance Technologies, consistently generates yearly returns that are considered the best in the industry and that supposedly are based on certain proprietary trend analyses.
I intuitively feel that the reliability of a trend depends on the sample period and probably also on some kind of “temperature” of the market. Apparently, 160 days worked well for the three stocks screened on June 12 in the miserable time the market is experiencing. Does anyone have any feeling or experience on how many business days would be necessary to establish a strong trend with reasonable reliability in its forecasting probability? Back testing then allows you to test the historical performance of such trends in similar and other markets.
Does Zacks Ranking Work?
Well i tried to find out and used zack rank for about 18 month including the research wizard and real trading.
First I needed to find out, that
Backtesting a specific period has given me a result xx,testing the same setup 3 month later has given me a different result and different stocks!.
hmmmmm.
Same parameters, same timeframe but
Different data and Different stocks????
Interesting enough to type some lines to support.
The answer was:
“Survivorship Database”.
which means for me..optimized.
Anyone same experience or any different?
By the way this sucks...wasted a lot of time and more money.
Guess I needed to learn the lesson again:
There is no shortcut to make Profits in real trading!
Would Zacks need to sell and market products like the wizard?
Would you?
John
Zacks ranking works for me.
As with most markets, segmentation is what matters most and only hard and persistent work creates unusual results.
When you segment all 220 Zacks#1 stocks in decades of 10 stocks with ascending DV’s (= average daily Dollar Volumes = daily closing price times 20-day moving average of daily volumes), you find that DV’s between $0.65M and $1.5M contain about 20 Zacks#1 stocks each week from January 07, 2000 onwards. Since that time, each week these 20 stocks compounded an annual growth rate (CAGR-1wk) of 52%, using Research Wizard’s back testing. During the past 1.5 yr, they only did 5%/year, still 14% better than the S&P500. These are handsome returns. It is possible to further increase the DV-range somewhat and increase the number of stocks. Then use valuation criteria to narrow down on a smaller number of stocks while increasing the returns significantly, even for the current bearish period. Slippages compared to these back tested results will not be negligible. Moreover, past results never warrant future returns. They may give an indication when the sample time is long enough.
I still have the April 15, 2007, historical database of RW and ran the screen on that DB from January 7, 2000, through April 06, 2007. I got a CAGR-1wk of 64% over 379 weeks with an average of 19 stocks. Using today’s available DB gives me 63% over the same 379 weeks with an average of 21 stocks, indeed with roughly 20% different stocks. Last November, Zacks added to its historical DB about 15% more stocks that were deleted from the exchanges before that time but were present in its DB when actively traded. They are included in the second run using this most recent DB, which yielded just about the same results as the 1.5 year-old DB. The strength of an effective stock selection strategy is that it should be insensitive to a survivorship bias.
I have found the support horrible with the RW. Then they contacted me the other day to sell me some new higher end service that sounded exactly like RW except that now RW does not include what they originally promised and the new service is more expensive.
I have also seen that actual trades are not the same as the backtested. It sounds like you need to save dozens of these old databases to determine if there is a survivorship bias?
I have found the support horrible with the RW. Then they contacted me the other day to sell me some new higher end service that sounded exactly like RW except that now RW does not include what they originally promised and the new service is more expensive.
After reading all these comments i am a bit confused.
Has anyone used the Research Wizard for a couple of years, and tradede with real money after it? and what was there results?
I can see a lot of discussion on the backtesting capability of this software, but what about the results of simply using their top recommended strategies? Did it really peformed as advertised, beating the market by at least 60% over the last few years?? Can anyone comment on this?
I have been using RW for four years with real money. Presently their so-called static database is almost ten years deep. If your strategy consistently accumulates money over all those ten years, and some of mine do, it is my experience they keep doing that in the future except for periods of increased volatility, like last October through last February. During that period they went down faster than the Indices. However, after February they outperformed the Indices by more than a factor of two. RW calculates your selections on the basis of Friday closes, so you can't buy them at the times you select the stocks. I buy them on Mondays at close and sell them again on Mondays at close. That costs me one fifth of the calculated accumulated gains, but it still works.
Two more remarks.
(1) I never traded their advertised strategies as I found them not consistent enough over the years. They were a good starting point for developing my own strategies. The accumulated gains need as straight of a line as is possible on a semi logarithmic scale over the ten years of history. Maximum drawdown should not exceed 30%, and win ratios should be of the order of 70%.
(2) RW is based on the statistics of weekly time series of fundamentals en prices and volumes. Small deviations from the regularity of the series may have enormous consequences for the outcome. Hence, always buy and sell your stocks at the same time when the market has some kind of equilibrium. Hence, never at open, but closings are OK as they have been included in the model. Sticking to that discipline for all your deals is much more difficult than giving in to the temptation to act different.
Anon,
Good insight into how to effectively use Zack's Research Wizard. I think it's like any other trading strategy--it only works if you follow your rules consistently.
Scott,
Here is a burning question to the world's trend champion, Jim Simons, with his answer:
How much of your success is pure luck and how much is the math, science, and minds?
Let's suppose you have a coin that is 70/30 heads. Well, if you get to bet heads, you are going to win 7 times out of 10. Three times out ten you are going to lose, and that's bad luck. So you need a measure of good luck to avoid a long run of tails when you have a 70/30 coin that's heads. At a certain point the luck evens out. Of course there's luck in our business, but so far we've had a nice edge.
It is also my experience that you need a hitrate of ~70%. Most if not all of the TA indicators have win ratios of 50% - 53%, except perhaps for the Tom DeMark Sequential Indicator, that is also ~70%. However, the latter one is a trend indicator with at least 9 sequential conditions (Markov chains), forcing you out of the market for more than 70%.
I've been a Zacks Elite member a couple of years and can tell you I've been very disappointed. I've lost thousands following their advice in the last year or so. In fact, the Hulbert digest that studies different stock letters shows Zacks Elite near the very bottom of the 159 news letters they rate. My advice is DON'T WASTE YOUR MONEY ON ZACKS ELITE!! I get constant e-mails from Zacks about some new service they're trying to sell me. My question to Zacks is why would I buy something new when what I've paid over $1000 doesn't work? Their ads even look like a get rick quick scam. I hope you do more than accept Zacks data for how their Zacks Elite has done...do you homework!!
I've been a RW subscriber for almost a year and I've lost not only my investment in the RW, but also many losses on the strategies they advertise. I wouldn't renew my subscription with YOUR money!!!
I have four RW strategies that produce separately and combined a CAGR of ~75% over the past 10 years if you buy and sell the weekly selected stocks on Mondays at close. One of these strategies selects some 8 stocks each week. I am willing to send Scott this selection every Monday for the next three months so that he can publish those on his secured site while I will stay anonamous. If the DOW drops more than 4.5% on a day, we use this as a stop loss and stay out for the next 20 days.
I've had good weeks and bad weeks using the Zacks Wizard. But in the Last six weeks I've gotten creamed in excess of $50,000. Part of the problem is my own. After a couple bad weeks I decided to sit on the sidelines in cash for a little while, just in time to miss the biggest gain in months. I was up nearly thirty percent for '09 when I started using Zacks. I'm closer to 10% now. That hurts. But I can endure losses if I have solid assurance that the swcreens are accurate and you can make serious money if you are faithful to the program. But it seems to be hard to find anyone who has continued using the Wizard faithfully for several years. Do any of you know of independent careful critiques of the Wizard? I want to believe but I don't want to wipe out in the process.
Scott, I totally agree: "There is a real lack of support for such an expensive product. I think it would really help to have a user forum available. Any sort of communication on a weekly basis would be great." What's with that? It makes no sense. I got into the Motley Fool Pro as a charter member and found the support was great. I wasn't so impressed with the profits their recommendations were providing. Still, I felt that support, encouragement and information was abundant from the Pro community and Fool staff. Zacks seems to say, "We've got your money. Now you're on your own." It is almost as though they are assuming they will have no return customers because they are doing nothing to foster loyalty. A community of Zacks Wizard users is really needed. If Zacks has no interest in fostering it, how can it be done?
It is relatively straightforward to test with RW under which market conditions the Zacks rank 1 and 2 stocks produce ineffective results. Jeremy Grantham's latest quarterly October newsletter spelled it out: "As we have demonstrated to our clients in earlier cycles, earnings estimates in particular merely follow the market up (not the other way around, as one would hope). So it is a law of nature that strong estimates will abound after a major market rally. The earnings and economic growth estimates in such cases are usually throwaways". Hence, when the market runs down in high volatility, I don't use RW to pick my stocks. During such a time, the earnings and growth estimates are usually throwaways as Grantham states. I estimate that to be about 30% of the past ten years. The onset of these periods do usually precurse themselves by a growing VIX and/or the first time that the DOW drops 4.5% or more in one day. For the rest, I find RW a money machine if you have the proper strategies and always buy and sell at Monday closes.
During the past six weeks, one of my better strategies in RW selecting 8 stocks per week ran -9.5%, Fridays to Fridays, -14.5% of which was during the past three weeks. YTD, during the past 44 weeks the result was 137%, Fridays to Fridays, including staying in the market during the four volatile weeks in February, when I stayed out, triggered by the 4.5% drop in the DOW. As stated earlier, when you invest rigorously from Mondays' closes to Mondays' closes, your result ends up at about 75%-80% of the result RW shows you would have gotten. This result excludes the transaction cost of the 8 stocks in the portfolio, about half of them stay two weeks or longer in the portfolio.
I just bought RW. I have been paper trading it for about 3 weeks and it looks good. You all mention buying at Onday close but they advocate getting as close as possible to the Friday close which is in the backtest.
Why wouldn't you try to get in during the day closer to the open?
It is my experience that you cannot beat statistics with RW. Trying to get Intraday the best deal for the stocks your strategy selects, statisctically always ends up at getting a worse deal than dealing in fixed patterns. Very few day traders make money, as, at any tick, it is fundamentally uncertain where the price will go.
If you would be able to buy at the Mondays' opening ticks, which in general is only given to the first deal of the day, and run RW's back test on these Opening Prices instead of on the Friday Closes, your CAGR will reduce by about 20%. The so-called 10 winning strategies combined select on average 50 stocks yielding a CAGR of 32% during the past 10 years. Since June 2007, the CAGR=-8% and a MaximumDrawdown of -60%. Buying on Mondays' opening causes the 10-years' CAGR to drop to ~12%. Now when you start trying to get the best intraday deal, that number may easily drop by another 10% as you usually end up worse than buying at a fixed time when the market is usually at the same condition, hence at market close.
I have been using the RW for just over 18 months now and I have not been disappointed. In fact, I began with only $20,000 and now I am up to $30,000 even after last year's horrible market crashes. Of course I did make mistakes but what I learned is the need to maintain my discipline and furthermore it important to inject some subjectivity into your selections. Do not make it a strictly mechanical affair. If the screen picks a stock but based on current news items it seems that this stock may crash then don't buy it. I trade weekly, on Monday mornings, placing my orders before the market opens and I use tight stop-losses of 7%.
There is another interesting trend that you can pull from Research Wizard. Its database contains over 5000 companies with ten years stored valuations of Price to Book values (PtB). Hence, it is straightforward to select for each week which and how many companies are undervalued (PtB<=1) and which ones and how many are overvalued, and what their respective percentage results are. Pulling these weekly data into an Excel sheet allows you to calculate the respective money flows into undervalued and overvalued segments of the equity market, using the weekly overall market volumes from Yahoo.
Since March 2009, the flow of money into undervalued stocks by far exceeds the flow into overvalued stocks, a signal of strong undervaluation. Today, this flow is about as high as it was at the 2007 May and October peaks of the stock markets when bubble formation was at maximum. Contrary to today, in 2007 the flow of money into overvalued stocks by far exceeded the money flow into the undervalued segment, a signal of strong overvaluation.
In conclusion, based on money flows over the past ten years of some 5000 US-traded stocks, today’s market is far from being overvalued and is ready to steadily rise further and pass into the territory of normal pessimism and optimism, a context where rational market dynamics should prevail. In line with the positive economic data, positive estimate revisions and exceptionally low interest rates all expected to dominate the outlook for the next half year, the equity market is likely to behave rationally and continue its V-shaped recovery.
I have used RW for over a month now, havent made any money yet but that is my own fault. I sell too early and sell when market nosedives. The back testing is great, I have designed my own strategy. Buying and selling every week is a hassle. Listening to all the posts here, I will try Monday close from next week.
I would like to warn everone who read this to stay away from RW (Zacks Research Wizard) and their recomended strategies. I wish someone would have warned me! Don't believe their bogus claims of huge gains! After 9 month of investing in their most "successfull" strategies - Big Money Zacks and PEG, I am down 10% while the S&P went up 5% over the same period of time. I have no idea how they dare to claim gains over 100%! I followed their recomendations and strategies using RW yet I was not ahead of the market even for a short time! At some point I was down 30%! Their strategies are a joke, especially Big Money which their wizard will consistently pick exactly at the high point before it drops! STAY AWAY!
Zacks ranking is based on changes in revision estimates in Earnings. They claim that highest quality earnings come from having robust revenue growth. That sounds reasonable. RW allows you to pull per Industry Sector the historical data of both the earnings estimates and sales estimates for the next fiscal year from their Dbases and compare those with their outcomes a year later and with the current earnings and sales. For instance, a year ago the annual sales of the financials of the S&P500 were estimated to grow by 3.1%, of the non-financials by 1.5%, and of the total S&P500 by 1.7%. Today, a year later, these annual sales growths came out as -29%, 0% and -7%. For next fiscal year these figures are currently estimated as -10%, 9.6%, and 6.7%. If you look at the reliability of these estimates over the past ten years, then you would not bet your money on them. Especially in volatile times I don’t see any correlation. In non-volatile times, earnings estimates are usually a factor of two too optimistic and sales estimates a factor of 1.5.
The 200+ Zacks #1 stocks are claimed to do much better than the S&P500. But that is comparing apples and oranges. If you would market-cap weight the Zacks #1 collection and rebalance them every week like is done for the S&P500 every day, you find the same price returns as you would find for any sufficiently diversified portfolio, hence the same as for the S&P500.
Indeed, I would be careful to blindly follow Zacks’ reasoning. But that is probably not their intent. The good thing is that their system is transparent in that the historical data are available and neatly arranged to test any possible rule of the dynamics of Wallstreet. Their income statement and balance sheet fundamentals are the same as those in the publicly available SEC files. My estimate for the resulting error rate of voids or erratic quarterly numbers is of the order of 7%. But still, you are able to see that analysts expect the income of their own sector to decrease by 10% next fiscal year after a disastrous year of almost -30%. And that they expect the sales of the S&P500 next fiscal year to grow by 6.7%, which is probably too optimistic by a factor of 1.5. But still, a 4% sales growth of the S&P500 amounts to $ 350 Billion. A third of those sales is sold outside the US. A third of the remaining two thirds can create 2.5 million jobs, about one third of the number of jobs that have been lost since October 2007. And the S&P500 sales only comprise about half of the sales of the publicly listed companies on Wallstreet.
I used RW from June 2009 thru November 2009 and then stopped, after losing faith in it output during the volatile months of October and November.
However, during that time I made $4,100 with it in two separate accounts with only about $18,000 to $25,000 at work at any given time. So, after the $1,800 initial cash outlay, I still netted a good annualized profit.
Tip:
The Big Money strategy works best when the Russell 2000 index is trading above its 10-week ema and the ema is rising. Try this and it will keep you out of sideways or bear market phases.
Only use the 'short' RW strategies when the Russell 2000 index is trading below its 10-week ema and the ema is falling.
Trading three or five stocks maximum should also help boost your returns. Try to avoid stocks with very poor liquidity and use Interactive Brokers so you can place 'market on open' orders - it will help you get more consistent fills on these kinds of small cap stocks.
RW is a terrific product, and if Zacks will get serious about after the sale tech support, they can truly boast about having the best stock trading system available at any cost.
I just posted, and also wanted to add this - I used the recommended 10% stop loss for all trades, and in a strong bull market (Russell 2000 index trading above its 10-week ema, with the ema in rising mode) using a 1-week hold on 3 Big Money Zacks strategy, it was a good fit.
It is surprising that RW doesn't come with a volatility-based initial/trailing stop function so that a user can come up with better risk control parameters. Backtesting with such an intelligent stop will give more realistic backtest results and that will help give RW users more confidence to stay with the RW's output week after week.
A 10% stop in IBM or CAT is a lot less risky than a 10% stop in a $6 small-cap issue that can trade all over the map in a period of hours.
One final thought - consider using a 1-day holding period instead of a 1-week hold. You'll trade a lot more often, but the results seem to be very good, mostly because you won't have 5 or ten stocks all going south at once when the market decides to take a hard corrective move - usually without warning.
Happy trading!
One of the disadvantages of trading only a few stocks like is done in Big_Money_Zacks (3 stocks) is the low liquidity of the selected stocks and their high slippages you are bound to get. They have already used a lot if not most of their momentum between Friday closes and Monday openings. The liquidity issue can be mitigated by programming a threshold for the daily dollar volumes of your selections. I usually use MovingMean4(i5)*i22>450,000, so that trading a few thousand dollar per stock, your part of the day’s trading is smaller than a %. When you impose such a threshold on Big_Money_Zacks, your back tested returns are reduced by 1/5th.
One of my more lucrative strategies is to select the best 12 or 24 small caps of Zacks Rank #1 stocks. Here I define small caps as having a market value (i21) between $100 Million and $500 Million. The strategy is then simply: Select Zacks Rank #1, select your market value range, select your daily dollar volume range, avoid penny stocks (i5>1.5), and select the bottom 3 to 40 market-value stocks. You can then further optimize the performance (cut the maximum draw down in more than half) by playing tit for tat: After a week that your losses are in excess of -2.2%, stay out, and get in again after this threshold is passed from below after a full week.
Thank you ananymous for your precious comments and suggestions.
I've tried RW with real money for some 3 weeks on three tweaked And backtested by me) "Zacks best strategies" with a 6-7% return so far.
If I see more comments here I'll post again
Since August 13, the 12 best ZR#1 Small Caps compounded over 50%, YTD 90%, with a flat part of 13 weeks prior to August 13. Originally, I expected the ZR#1's to stay flat for a full 13 weeks again from the beginning of November onwards, but apparently that did not happen. That horizontal move may start any time as back testing reveals.
I found this link looking for pricing info. Scott's info was interesting. Recent posts suggest this blog is dominated by "Anonymous" (from Zacks?)
Many years ago I tried the screener from non-profit Investor's Alliance, and has extensive fundamentals and backtesting. Still around $220/yr for the top-of-line product?
The main thing is that many of the tickers of "the entire market" did not contain much fundamentals. Fundamentals only updated infrequently and I assume significant lag from service discovery and the info being "available" from the company. Like looking online at other finance sites, Yahoo,MSN,Google, often you must go to a company's website to find the most recent releases that have not filtered to the media channels. So the fundamental rankings often have significant lag.
Their top screens (Top 10?) that are free with top-of-line, if I recall, are advertised all at 30%+/yr. Backtesting is at best tricky business.
It would be interesting to find other's experience of Investor's Alliance as mine is from around 2000.
Now I am tempted... I went to Google and did a search on Investor's Alliance and find many interesting promises of new features "soon to be available". I wonder if those said to be available by end of 2010 or any for early 2011 are yet available. I found it at: http://www.powerinvestor.com/
I tried Zacks free 30-day a long time ago. I decided to try it passively putting $4600 into the Powershares Zacks Microcap ETF (PZI) in a taxable account on 12/28/2007 (300 shares). With div. reinvestment, it is now 306.6 shares and down -21%. The account is up 23% as a result of investing high '07 cash levels up until about 50% of the way down in '08 at which point I was aghast and could no longer bear moving more to shares or funds. During that time the account had net withdrawals of $10k moved to IRA, so I think timing works better than screening. The trend is your friend, with the S&P currently fighting the 50d MA and lower BB...
Well I have found a link from 2007 that reminds me why I did not renew my membership in Investor's Alliance back in 2000:
http://jasonkelly.com/2007/08/power-investors-publisher-responds/
The current PowerInvestor website suggests a lot of features I bet are still not available. I recall back in 2000 waiting, and waiting, and... I think it is due to the nonprofit status that likely provides for limited staffing. Still I recall the service useful, if as one source of educational materials, an abundance of which are provided to members. If there were an active member community out there, I might hop on board again. In that regard, seems this is the same with Zacks service.
Glad I found your site. Provided me with a lot of introspection and places to check back up on ... like reading Jeremy Grantham's letter at:
http://www.gmo.com/America/
I recall a few months ago that he stated stocks were overvalued but was fully invested because of the support provided to the markets by the Fed. And Now?
How does one define irrational market behavior?
You never get a straight answer to that question, but here is mine. The market is moving irrationally when it doesn’t move with the rationale of the fundamental analysts. But that is the easiest thing in the world to check out with Zacks’ own stock market instruments. Just take all 800 or so Zacks Ranked #1 -#3 Small Caps that should be poised to grow according to Zacks’ analysts, and look on a weekly basis how they move relative to the S&P500. Usually this pack moves ahead of the S&P500, except for prolonged periods of time that extend either over roughly 7 or over roughly 17 weeks, in total about 40% of all trading days. Since January 17, this pack of some 800 stocks is presently lagging the S&P500 by -5.25%, its maximum drawdown in the past 9 weeks, and still probably more to come. To my knowledge, this is the best available Indicator for irrational market behavior. The way you select this pack in Research Wizard is as follows: Market cap between $100 Million and $500 Million, and price larger than $1.5 and Zacks rank between 1 an 3.
Now here is the other side of the coin. During the remaining 60% of the trading days, the markets will generally move with the rationale of analysts. In my world that implies that analysts then move the markets. Just think of the consequences of that.
Anyone have a current version of Research Wizard.
I would greatly appreciate it, if someone could print the internal list of what the i-values represent. I have these old systems, but I used the custom mode and cannot find what some of the values were.
Just take a 2-weeks trial subscription.
I have been a RW subscriber for close to 9 years now, and know the product inside out, and have been quite satisfied with the performance. My subscription fees haven't gone up in years and the software works quite robustly. I use 3 years of data for backtesting and can duplicate their results quite well. Some problems that I have overcome over the years are:
1. Survivorship bias: If you are playing around with microcaps, this could be a problem. Usually the stocks that have vanished are the ones that have gone down or are delisted. So, your results will vary from RW BT. So, go with small caps and bigger, but not micro or nano caps. Also, select min. price of $1. Remember that less than $1 priced stocks results are difficult to duplicate because bid-ask spreads can kill you. It's not RW's fault.Exclude OTC stocks (high bid-ask spreads, low volume)
2. Years ago RW database had a problem with earnings data. Their results were forward-looking. For ex., a stock should be selected by RW for its quarterly earnings only after its earnings release date when those earnings became known to the world. But RW used to select them right after the quarter was completed. This problem has since been corrected. Now earnings-based strategies can be duplicated.
3. RW BT results are based on Friday closing prices. Run RW over the weekend and place market-on-open orders on Monday morning. The difference is negligible. You will get BT gains in your portfolio.
4. I can now get bt list of stocks for any date from a BT screen using historical database with historical selection criteria.
5. Personally I use S&P 500 stocks, combine a number of long and short screens to get my long-short market-neutral portfolio and duplicate RW BT results consistently right down to the penny. I keep a detailed daily record to compare my gains with RW BT. In fact, I will soon be starting a hedge fund using RW. I use 1-wk holding period for RW BT, and trade aggressively to duplicate the turnover as shown in RW BT report. And I always buy on bid and sell on ask, and always maintain market neutrality of my portfolio.Once you begin to have a directional opinion about the market, that is the beginning of the end !
6. If you are consistently losing money with RW, then may be you should short these stocks than going long with them! Jokes aside, believe me, you can duplicate RW BT results. You may have to duplicate the large turn-over. So choose a cheap direct access broker.
Good luck.
I think the real problem with RW is commissions. I ran a 3 year test of a small portfolio of $10,000 and the results of trading 7 stocks a week was a 100% return. Not bad, but factor in trades of $7 and at the end of 3 years you have lost over $12,000. Even with a port of 100,000 you end up with 16% a year not the 26% the report gives you. If you are going to trade with RW you better get a brokerage account with Interactive Brokers for low commissions.
The real power of RW is that it shows that any combination of fundamentals does not consistently give you robust gains. During the past four years, the 190 Zacks Ranked #1 stocks that were at least traded with some minimum Money Flow and were no penny stocks nor micro caps underperformed the S&P500. Your accumulated gains, including dividends were negative over these past four years.
Net earnings per share and net margin of the non-financial sector (80% of all stocks) are significantly larger (16%) now than four years ago. The price that the market presently pays for these 16% higher net earnings is over 20% less. RW indisputably shows that Prices do NOT follow Earnings, not over the past four years, nor over the past twelve years. In addition, it shows you that Prices do NOT consistently follow estimate revisions.
My explanation for this inconsistency is that RW stores its data and values it one to four months AFTER the money was real-time earned by the companies. Reporting has that kind of time lags. Only Insiders are able to real-time judge the value of income, earnings, costs and investments and how these are being balanced with employees’ wages and customer prices. Were ever before, Wall Street’s earnings and cash so much out of sync with Main Street’s wages and customer prices?
I have been using RW for 3 months now. I cannot help but echoing some of the negative sentiments expressed in this forum. My biggest concern is there is no consistency between stocks that are selected by a strategy in real time and by the same strategy for the same time period on backtesting.
For example a particular strategy that I use for trading selected the following stocks in realtime on 12/16/2011- ACTG, ACCL, ACN, ACOR, ADTN, AZES, AAU, ABFS, ABX. However the same strategy selected the following stocks on backtesting for 12/16/2011- ASTX,CPRX,PGNX, SCR, YMI, SRZ, VHC, MOSY, END, DFG.
The first set of stocks (real time selection) gave a return of over 6%in one week. The second set of stocks (on back testing for the same time period) gave a return of 18.5% in one week. While I am happy with both outcomes, I think it is not right to pick one set of stocks in realtime and completely different set of stocks using the same strategy for the same time period on backtesting.
This makes the backtesting results suspect at the very best. I am going to watch this more carefully and report to the forum members if i continue to see inconsistencies.
What I see from your first selection is that you selected stocks all starting with an “A”. That usually happens when one of your selection rules was not programmed for the proper Dbase. For Instance, when you program Movingmean4(i5)*i22>450000, that selection rule works OK in back testing, but when you use it in a query, you will get the stocks in alphabetical order that satisfy the other selection rules.
The reason is that, by default, the query uses dbcm and back testing uses dbcmhist. In this particular case, the query needs to find the 4-wks average of i5 (current price) and that item is only stored for 1 week in dbcm and for all weeks in dbcmhist. To get the results the same, program your queries in dbcmhist. To do that, click file in the main menu and click then the historical dbcmhist that you license. Every time you run a back test and want to reprogram something in your screen, you have to make sure again all your programming lines are programmed in dbcmhist.
To be a little bit more specific, you get an alphabetical list of tickers in a query when you use a query containing a TOP or BOT function in combination with items that are not present in the default database (dbcm), for instance when you program in dbcm:
i5[Recent-1w]/i5[Recent] Top#12
Thank you. I will follow your instructions and report back.
Does anyone know what the equivalent of top# or bot# is if I am using calculation expressions in my screen ?
For example, if I need top 20 priced stocks, I can select current price, then top# operator and then 20 in the next field. But if I am using a calculation expression for the same screening condition, I'll use i5 for current price. How do I translate top#20 on the calculation expression line ?
Any help would be greatly appreciated.
Thanks
In the menu screen, click "Screen by calculation expression". Input your expression in the empty line under "Calculation", press OK, and click the droplist (not the one with the choice for "And/Or", but the other one with the ">" sign. Select your function like Top# or Top%, and put the rank in the empty next column. That is all.
I think the RW is a huge rip-off. It is clunky, and trying to get it to produce good results is very difficult. It is VERY hard to design your own screens, and their screens are hard to manipulate in any way at all, to add or subtract criteria.
As far as backtesting goes, you can only go back so far, depending on the size of your hard drive. In my case, it was about five years, and that was it.
Don't get ripped off. Don't buy this product!
I have been using Zack's research wizard for 5 months now. It is a great product that gives the small investor an edge. If you are a technical trader and hope some stock pattern is going to make you rich, Research wizard is not for you. But if you are a fundamentals trader their product will give you and edge. I have been tracking my weekly progress and found that it is not inconsistent with what backtester predicted. I am obtaining consistently better results than the S&P. However, to do this one must develop their own formula and backtext it back to 1999. However, I agree with some of the above comments that their canned screens do not holdup over the entire period back to 1999. But, I assure the reader that a reasonably intelligent person can develop their own screens based on improving the Zack rank 1 and 2 stocks. But in developing the screen pay as much attention if not more to find screens that have lower losses as well as better gains in backtesting.
Re: March 30, 2013, post. RW 4.0 is available free for 2 weeks. Is that long enough to get a sense of the product, the niceties of how it works, how to program to get what you want, and whether to buy? Without spending 20 hrs a day on it?
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