Chicago, IL – August 18, 2009- Kevin Matras looks at stocks that currently have a Zacks Rank of 1 but were Ranked a 5 or 4 only one week ago. Highlighted stocks in this week’s article include Given Imaging Ltd. (NASDAQ: GIVN) and Princeton National Bancorp, Inc. (NASDAQ: PNBC). Click here for the full story exclusively on /?id=5528.

Screen of the Week written by Kevin Matras of Zacks Investment Research:

Today’s screen is a simple concept but a very powerful one.

First, let’s start off with some Zacks Rank facts:


  • Over the last 21½ years, the Zacks #1 Rank stocks (or Strong Buys) has significantly outperformed the market by showing an average annual return of over 27.3% per year.


  • This compares to the S&P 500’s return of only 8.6% per year.


  • The Zacks #5 Rank stocks (or Strong Sells) has significantly underperformed the market with an average annual return of literally less than 1% (0.92%) a year.


The complete breakdown is below:

Only 5% of the stocks can get a Zacks #1 Rank. Likewise, only 5% of the stocks can get a Zacks #5 Rank.

The Zacks #2 Ranks and Zacks #4 Ranks have the same distribution as well – 15% each.

So the #1s are in a very coveted spot and reserved for only the best stocks. And the #5s are reserved for the worst ones.

If a stock has a Rank of 4 or 5 (Sell or Strong Sell), something huge would have to happen in order for it to leapfrog so many places to get to be a Zacks #1 Rank.

And that’s today’s screen.

We’re looking for companies that currently have a Zacks Rank of 1 (Strong Buy) that were Ranked a 5 or a 4 the previous week.

Here’s how that expression looks in the Research Wizard if you’re doing it on your own at home.

BTW – this screen already comes loaded with the Research Wizard and it’s called ‘zacks rank 5 or 4 to 1’. It’s in the SoW (Screen of the Week) folder.

This screen does not produce a ton of stocks because seeing a stock go from a 5 or a 4 to a 1 is somewhat rare. But it’ll usually produce a few stocks per week.

But these stocks are worth the wait.

A backtest of this strategy (using a 1-week holding period) from 2007 thru July 2009 (the whole of the bear market) showed a total compounded return of 481% vs. the S&P’s 28.8% during that same time.

That works out to be an average annual return of 96.9% a year vs. the S&P’s 12.2% a year.

There will be periods where no stocks will qualify.

But again, when they do, it’s worth the wait.

This week, there were only 2 stocks (for the week of 8/17/09):

GIVN Given Imaging, Ltd.
PNBC Princeton National Bancorp, Inc.

But if you run it every day, you’ll likely find even more.

Give this screen a try in your own portfolio and see if it outperforms for you. Click here to learn more and to begin a 2-week free trial to the Research Wizard:

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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