![]() In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. And empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. On the other hand, earnings estimate revisions are at the core of the Zacks Rank. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide. Therefore, using the ABR to validate the Zacks Rank could be an efficient way of making a profitable investment decision.Īnalysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Zacks Rank, our proprietary stock rating tool with an impressive externally audited track record, categorizes stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), and is an effective indicator of a stock's price performance in the near future. Therefore, the best use of this information could be validating your own research or an indicator that has proven to be highly successful in predicting a stock's price movement. In other words, their interests aren't always aligned with retail investors, rarely indicating where the price of a stock could actually be heading. Our research shows that for every "Strong Sell" recommendation, brokerage firms assign five "Strong Buy" recommendations. ![]() ![]() According to several studies, brokerage recommendations have little to no success guiding investors to choose stocks with the most potential for price appreciation.Īre you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. The ABR suggests buying SoFi Technologies, Inc., but making an investment decision solely on the basis of this information might not be a good idea. Check price target & stock forecast for SoFi Technologies, Inc. ![]()
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