Unleashing the Power of Zacks Style Scores: Your Key to Selecting Market-Beating Stocks
Investing in the stock market can be a daunting task, especially for those new to the world of finance. With countless stocks to choose from and an endless stream of market data, it’s easy to feel overwhelmed. However, one tool that can help you navigate the complexities of stock selection is the Zacks Style Scores.
What Are Zacks Style Scores?
The Zacks Style Scores are a unique set of metrics developed by Zacks Investment Research that helps investors identify stocks with the highest probability of outperforming the market. These scores are calculated based on six different factors: Value, Growth, Momentum, Size, and two Quality sub-scores (Quality and Value Composition).
How Do Zacks Style Scores Work?
Each stock is given a ranking from 0 to 10 for each of the six factors, with 10 being the highest. The Style Scores are then calculated as the average of these ranks. For example, a stock with a Value Score of 9, a Growth Score of 5, and an Overall Rank of 7 would have an Overall Rank of (9 + 5 + 7) / 3 = 7.5.
Why Use Zacks Style Scores?
The Zacks Style Scores provide several benefits for investors:
- Simplify the Stock Selection Process: With so many stocks to choose from, it can be difficult to know where to start. The Style Scores help narrow down the list to those with the best combination of factors for your investment style.
- Identify Market-Beating Stocks: Research shows that stocks with high Style Scores have a greater likelihood of outperforming the market. In fact, Zacks’ research shows that stocks with a Style Score of 80 or above have a 60% chance of beating the S&P 500 index.
- Diversify Your Portfolio: By using the Style Scores to identify stocks in different sectors and industries, you can build a well-diversified portfolio that is less susceptible to market volatility.
How to Use Zacks Style Scores
To use the Zacks Style Scores, follow these steps:
- Visit the Zacks Screener page on their website.
- Select the specific style score(s) you want to screen for.
- Set your desired score range and other screening criteria.
- Run the screen and review the results.
Impact on Individuals
By using the Zacks Style Scores, individual investors can make more informed decisions when selecting stocks for their portfolio. This can lead to better returns and a more diversified portfolio. Additionally, the scores can help investors stay focused on their investment goals and avoid the emotional decision-making that can lead to costly mistakes.
Impact on the World
The widespread use of tools like the Zacks Style Scores can lead to a more efficient and informed stock market. By helping investors make better decisions, the stock market can become more efficient, reducing the impact of market volatility and leading to more stable economic growth. Additionally, the use of data-driven investing can lead to more accurate valuations and a more transparent market, making it easier for companies to raise capital and grow.
Conclusion
Investing in the stock market can be a complex and intimidating process, but tools like the Zacks Style Scores can help simplify the process and increase the likelihood of selecting market-beating stocks. By using these scores to identify stocks with the best combination of factors for your investment style, you can build a well-diversified portfolio and achieve better returns. Additionally, the widespread use of data-driven investing can lead to a more efficient and informed market, benefiting both individual investors and the economy as a whole.
