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Page 1: Contents › adv › 5s2d_201506.pdf · We sifted through stocks that met Zacks Rank criteria and then chose the crème de la crème. Each of the five stocks has unique qualities
Page 2: Contents › adv › 5s2d_201506.pdf · We sifted through stocks that met Zacks Rank criteria and then chose the crème de la crème. Each of the five stocks has unique qualities

25 Stocks to Double

ContentsOverview 3

Taser (TASR) 4

Sangamo BioSciences (SGMO) 8

Commercial Vehicle Group, Inc. (CVGI) 13

TrueBlue, Inc. (TBI) 16

BJ’s Restaurants (BJRI) 19

Other Zacks Resources 23

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OverviewThank you for your interest in Zacks and the 5 Stocks to Double report. This report will give you an idea of the enormous resources available on Zacks.com. I invite you to visit the site and get familiar with the Zacks Rank, our stock pick-ing framework that has an impressive track record of generating market-beat-ing returns year after year.

Each of the 5 stocks in this report was hand-picked by one of our stock strate-gists, who explain their rationale in the included stock write-ups. Clearly, this report was not written for the risk-adverse or conservative investor. Rather, these stocks are for the aggressive investor looking to add home-run poten-tial to his or her portfolio. It would be prudent to devote no more than a small portion of your overall portfolio to these stocks.

That said, we hardly threw darts at a board to arrive at these choices. All of the stocks have catalysts that we think could fuel strong gains over the coming year. We sifted through stocks that met Zacks Rank criteria and then chose the crème de la crème. Each of the five stocks has unique qualities that make it a candidate for this report. And they are all from different sectors, offering a level of diversi-fication even in this small sample.

Most of the stocks in this report are currently flying under the radar of most Wall Street analysts and traders, which provides a good opportunity to get in on the ground floor. The market is littered with these kinds of stocks, but only the ones with positive catalysts on the horizon burst onto the scene with monstrous gains. We made sure that we could identify specific factors that would bring these stocks out from obscurity and onto the lists of top performing stocks.

We are confident that you can realize enormous gains with these 5 stocks. Leave the singles and doubles for other portfolios; we are swinging for the fences on this one!

Best regards,

Sheraz Mian

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Taser (TASR) I’ve been a big fan of today’s “Stock to Double” for at least the past year. And it’s not just because I’ve liked the chart or it’s been a Zacks Rank #1 (Strong Buy) several times. This stock has a great story behind it as well. Recently it’s found a way to pick up a new revenue stream that it’s never had before as a company. They’ve manage to transform themselves from a product manufac-turing company to an online service company as well.

You may know Taser (TASR) for its non-lethal device that police officers use on unruly college kids. Their electric devices are used by over 780,000 officials in the US alone. These products help TASER bring in over $164 million in revenue each year. But TASER is entering the body camera arena with a new line of products for officers.

In December, President Obama announced the White House would help buy 50,000 body cameras through a spending match program with local law enforcement in order to double the number of cameras in use across the coun-try. Totaling about $75 million, that influx of buying was more than seven times what TASER made off body-camera sales in 2013. The potential market size is staggering. There are over 700,000 police officers in the US today.

Competitive AdvantageTASER already has an edge in this space because it has an existing relationship with precincts all around the US. It should be easy for them to lean on these relationships to introduce their body camera products. It’s a whole lot easier to leverage a current relationship with municipalities than it is to try and create one out of nowhere.

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But the benefits potential revenue stream for TASER is beyond just the sale of body cameras. TASER is transforming itself and horizontally integrating itself by adding hosting services for the files the body cameras record. It’s released Evidence.com in order to provide an easy cloud-based hosting solution where officers can upload their files for safekeeping. This is a “sticky-money” approach for TASER and could potentially be a larger revenue stream than their current devices provide.

New Business ModelThe fresh business model is working. Q1 revenue came in at $44.8 million, up 24% YoY. Their video-hosting business showed a revenue increase of 73% YoY. The company sees interest for body cams accelerating and has 16 major cities deploying body cams and now counts 22,000 users of EVIDENCE.COM. That’s up 45% quarter-over-quarter during a historically slow season.

About 80% of their AXON body camera purchases are sold with an EVIDENCE.COM contract. These aren’t month-to-month deals either. 79% of the contracts are sold on a five year term. Year-over-year growth numbers on the EVIDENCE.COM segment of the business are currently tracking at 288%.

RevisionsAnalysts have taken note of the uptick in the video business. Over the last thirty days alone, five analysts have increased their earnings estimates for the current year while four have done so for next year. The bullish behavior has pushed up the Zacks Consensus Estimate for the current year from 40 cents to 49 cents and for next year the number has jumped from 55 cents to 59 cents.

TASSER has had some great EPS growth in the past. After a rough year in 2011 where EPS numbers were continually revised down, TASER turned things around. Steady EPS growth and positive revisions were seen throughout 2012 and 2013. Things seemed to stall out a bit at the start of 2014 as TASER began to shift its focus to body cameras and away from their non-lethal weaponry. With the turn-around in the body camera business we’ve seen a turnaround in share price. As you can see from the Price and Consensus chart below, recent revisions have been to the upside for TASER. Further build out of EVIDENCE.COM will lead to a more steady business as the subscription-based model draws more revenue.

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The recent bullish analyst behavior has helped shares rally from $10 in July 2014 to the $31 level shares trade at today. A major rally into the end of last year ran out of gas at the $28 level. A huge retracement to start March saw shares retreat to below $22 before buyers gained the courage to jump back in. The surge back through former resistance at $28 now sets that level as a long-term floor for the stock price.

After hitting a fresh 52-week high of $34.98 shares sold off again, cooling off an overbought commodity channel index. The CCI retreated all the way from over 200 to -100, swinging the pendulum all the way to oversold territory. From there, this rally looks to extend on what could be a CCI “Buy” signal with the stock trad-ing just below the 21 day moving average that currently sits at $32.46.

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Bottom Line TASER is transforming itself from a one-time purchase product to a reoccurring revenue stream model with its body cameras and EVIDENCE.COM platform. They should benefit greatly from the addition of these products to the modern police form. The potential in the US alone is enough to warrant TASER being my “Stock to Double.”

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Sangamo BioSciences (SGMO) When I’m asked for a stock with the potential to double in 12-18 months, I often go to my favorite sector, Biotechnology. In January, I chose Seattle Genetics (SGEN) for the “home run” ride and investors who took my advice to buy between $30 and $32 are sitting on nearly 50% gains in just six months.

So you will not be surprised to hear I am sticking with Biotech. And the name this time has one of the same catalysts as SGEN: the dynamic Biotech duo from Baker Brothers Advisors is buying. In moment, I’ll show you their stake and the other “whales” who have also been adding shares this year. First, let’s get to know our newest idea.

Sangamo BioSciences (SGMO) is a $900 million company based in the Bay Area of California, the birthplace of Biotech. Founded in 1995, the company went public in 2000 and traded as high as $50. They are a leader in the development of novel transcription factors for the regulation of gene expression. Transcription factors are proteins that turn genes on or off by recognizing specific DNA sequences. The Universal Gene Recognition technology platform enables the engineering of a class of transcription factors known as zinc finger DNA binding proteins.

Their lead clinical program is currently in Phase 2 clinical trials testing a zinc finger nuclease (ZFN)-modified cell therapy for HIV-infected patients to render and maintain them resistant to HIV infection without chronic drug treatments. Here’s a snapshot of their entire pipeline…

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Worth noting is that one of their “big brothers” is Biogen (BIIB). In Biotech, small companies rarely make the progress they do with expensive and long R&D trials without the help of cash-rich established players. And the best news is that the big guys’ partnership with the little guys is pure self-interest. In other words, they wouldn’t bother risking money or their good name on science they didn’t believe in.

The partnership began in January of 2014 when Biogen plunked down $20 million and promised $300 million more if certain R&D milestones were met in two inherited blood disorders, sickle cell disease and beta-thalassemia. According to a Fierce Biotech story by John Carroll…

The deal brings a major league player to the genome editing game, which has been gaining new attention with some significant new investments in the field. In this instance, the technology can be used to address “the abnormal structure or underproduction of hemoglobin,” either by knocking out a key regulator of gene expression or inserting a corrective gene to substitute for the defective one causing the disease.

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Who’s Still Buying SGMO? In the first quarter of 2014, SGMO shares rallied from $13 to $24 on the Biogen partnership. But since then it’s been a rocky road for investors who’ve watched the stock bounce back and forth between $10 and $20 for the past year.

This sort of volatility, with big swings of optimism and pessimism, is typical of early-stage Biotech companies with only a few drug candidates in Phase 2 trials. The wait for success is long and much patience is required.

But many large, and presumably smart, investors have taken the opportunity to buy more SGMO shares every time it dips under $15. Here’s a list of the top 15 buyers in the first quarter of 2015 whose net accumulation of shares increased overall institutional ownership by 7% to over 76%…

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Some good names on this list, including Millennium Management, Goldman Sachs, Columbus Circle, and Janus. But my favorite name to follow in Biotech is Baker Brothers. These guys manage money for the Tisch family, owners of the NY Giants. And they put all their marbles in one basket: Biotech.

That’s because brother Felix has a PhD in immunology and he sits on the board of many of the companies they take 5-25% stakes in. And brother Julian is the business and trading genius, and also on the boards of a few biotech compa-nies. Together, this dynamic brotherly duo more than doubled their fund in just 2 years, going from $4 billion in assets at the end of 2012 to nearly $9.8 billion in AUM at the end of 2014. That’s focus and concentration bringing home the bacon for one of the best hedge fund returns in this bull market.

I follow the Baker Brothers for two primary reasons: first, they are obviously enormously successful and good at what they do. There is one obvious caveat here, though. Since they buy many dozens of Biotech companies, they take a lot of swings knowing that they are not all going to work out.

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But the second reason I follow them is because they work so hard to know which companies are worth their investment dollars. They don’t have mandates like most other fund managers that tell them what sectors to be in, what market caps to buy, or when to be concerned about interest rates.

They get to focus on good Biotech companies and that’s it. And since they are so good at researching and advising these companies, nobody can tell them what to buy or sell, or when. They are free to focus on excellent investing for the long-run.

I like that because I don’t have time to go and get a biochemistry degree and begin to understand all the complicated science involved. I need to be able to trust the research being done on my behalf by the Bakers and other whales.

What Say the Analysts? For the last word on Biotechs, I often turn to the investment bank analysts to check on their homework. Many of Wall Street’s Biotech analysts are trained in the life sciences and they seriously compete with their peers to understand emerging companies, their pipelines, and their chances with the FDA.

Here’s what Wedbush analysts had to say in April…

Sangamo BioSciences is a true biotech company, in our view—leveraging their proprietary state-of-the-art zinc finger technology platform to develop poten-tially transforming treatments and potential cures for difficult unmet medi-cal needs. At the end of Q1:15, the company had about $226.1 million in cash. With this cash and potential partnership income to offset burn, we project cash runway for the foreseeable future and cash to cover additional HIV program catalysts as well as initiating clinical development in their multiple monogenic disease and potentially cancer immunotherapy programs.

And in June the analysts reiterated their Outperform rating and $30 price target. That sounds like they believe SGMO has a good shot to double in the next year or so. I recommend buying shares between $10 and $13.

Disclosure: I own SGMO shares for the Zacks Follow The Money Portfolio.

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Commercial Vehicle Group, Inc. (CVGI)Commercial Vehicle Group, Inc. supplies a full range of cab related products and systems for the global commercial vehicle market, primarily for the medium-and heavy-duty truck (55% of 2014 sales) and construction (24%) markets. Its prod-ucts include seats (42% of 2014 sales), wire harnesses (21%), trim (19%), struc-tures (11%) and wipers/mirrors (7%).

Seventy percent of 2014 sales came from six customers: AB Volvo, PACCAR, Daimler Truck, Caterpillar, Navistar and Deere. Seventy-five percent of sales came from North America. It is headquartered in New Albany, Ohio.

CVG 2020In September of last year, the company laid out its long-term strategic plan known as “CVG 2020”. The main goal of the plan is “to achieve sales and earn-ings targets commensurate with companies delivering top quartile total share-holder returns”. More specifically, this mean a 6-8% compound annual growth rate in sales from 2014-2020 and a 13-17% CAGR in EBITDA (earnings before interest, taxes, depreciation, and amortization), according to the company.

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Management believes CVG has significant organic growth opportunities as it currently has just 5% market share in its addressable global markets. Geographically, the company expects to grow in the Asia-Pacific region. The company also wants to diverse its end markets more towards the agriculture market, and to a lesser extent the construction market.

Strong First Quarter ResultsCommercial Vehicle Group reported strong first quarter results on May 5. Revenues rose 11% year-over-year to $220.3 million, well ahead of the consen-sus of $209.0 million. And this was in spite of foreign currency headwinds of $5.0 million and bad weather. The sales increase was driven by robust production in the North American medium and heavy duty truck market.

Operating income more than doubled from the same quarter last year to $11.2 million. This was due to a nearly 100 basis point improvement in the gross profit margin and lower selling, general and administrative expenses as the company strives for its CVG 2020 plan.

Adjusted earnings per share came in at $0.13, crushing the Zacks Consensus Estimate of $0.05. It was up from EPS of $0.01 in the first quarter of 2014.

Estimates Rising, Strong Growth ProjectedFollowing strong first quarter results, analysts revised their estimates signifi-cantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank of 2 (Buy).

Based on current consensus estimates, analysts project earnings per share to nearly double this year to $0.57. The 2016 consensus is calling for EPS of $0.73, or 28% annual growth.

Attractive ValuationThe valuation picture looks attractive for shares of Commercial Vehicle Group. As of June 4, the stock traded at just 10x 12-month forward earnings, well below the industry median of 14x. Its enterprise value to EBIT (earnings before interest and taxes) ratio was just 9, also below the industry multiple of 12.

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If Commercial Vehicle Group can consistently deliver on its CVG 2020 plans, I would expect these valuation multiples to expand significantly over the coming quarters.

Note, however, that CVG operates in a highly economic-sensitive industry, and its shares are highly volatile. This is not a stock for the faint of heart. CVG is also highly levered with a debt-to-equity ratio over 4. A prolonged economic down-turn could create a lot of problems for the firm and its shares.

The Bottom LineWith a multi-year growth plan set in place, solid earnings momentum and very reasonable valuation, Commercial Vehicle Group offers investors attractive upside potential.

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TrueBlue, Inc. (TBI)While it has been a recovery of fits and starts for the US economy since the Great Recession, the job market has finally turned a corner.

In 2014, 2.95 million jobs were created, the most since the dot.com mania year of 1999.

For most of 2015, weekly jobless claims have trended below 300,000, which is the smallest number of people receiving unemployment insurance in 14 years.

Employers are starting to have difficulty actually filling positions, which is putting pressure on wages because employers have to pay more to find workers.

If you’re a staffing business, these are nearly perfect market conditions for you to grow.

Blue Collar Labor is in DemandIn April 2015, construction spending rose 2.2% to $1 trillion. This was the highest level since November 2008.

Non-residential spending was up 3.2% in April and was up 8.8% year over year. In a bullish sign, the prior months of February and March were also revised higher.

Many sectors showed double digit gains year over year including commercial construction, office buildings, lodging, sewage-waste and amusement-recre-ation.

What this means is that companies suddenly need more workers.

Staffing Companies Fill the VoidTrueBlue is a $1.2 billion market cap blue collar staffing company which special-izes in providing on-demand temporary and full-time employees in construc-tion, manufacturing, warehousing, retail, events and hospitality.

In construction, it provides staff serving the light-industrial sectors in manufac-turing, warehousing and logistics.

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It also provides fully-outsourced staffing in the energy sector, hospitality, drivers for transportation, aviation mechanics and can manage larger staffing projects.

8th Earnings Beat in a Row in the First Quar-terOn Apr 23, TrueBlue reported record first quarter results and beat the Zacks Consensus Estimate by eight cents, or 67%. It has put together quite an earnings surprise track record, having beaten eight quarters in a row.

Revenue rose 45% to $573 million, some of which was the result of acquisitions.

But it had a strong performance in Outsourcing Solutions and saw improvement in some construction markets including California and Florida.

Not surprisingly, it faced some headwinds in Texas due to the weakness of the energy industry.

Growth and ValueGiven the economic conditions, analysts are bullish about TrueBlue’s growth potential. It has been steadily growing its earnings both through acquisitions and organic growth.

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Earnings are expected to rise by 25% in 2015 and another 16% in 2016, to a new 5-year high.

Yet shares of this small cap staffing company are still attractively valued. It has a forward P/E of just 16.2, which is under the average of the S&P 500 of 18.3.

It also has a price-to-book ratio of 2.6. A P/B ratio under 3.0 usually indicates a company has value.

Additionally, TrueBlue’s price-to-sales ratio of 0.5 is another strong sign of solid fundamentals. A P/S ratio under 1.0 usually means a company is undervalued.

Small Caps Still Have Room to RunDespite the Russell 2000, the index of small cap companies, hitting new highs during this bull rally, the small caps still have the most potential. Small cap companies have the fastest growth rates.

TrueBlue represents a hidden value in an industry, blue collar staffing, that is just starting to heat up.

For investors looking for a way to play the recovery in the US jobs market, espe-cially as construction and manufacturing pick up, then TrueBlue is a stock to keep high on the short list.

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BJ’s Restaurants (BJRI) Thanks to savings from lower gas prices, consumers have started spending more on dining out. Rising discretionary spending bodes well for the restaurant indus-try and makes this Zacks rank #1 (Strong Buy) restaurant stock quite appetizing.

About the CompanyFounded in 1978 and headquartered in Orange County, CA, BJ’s Restaurants (BJRI) owns and operates a chain of 159 high-end casual dining restaurants in 19 states. Their restaurants feature a broad, diversified menu for any dining occa-sion and aim to provide “premium casual” experience at “mass market casual” price point.

BJ’s signature menu items include deep dish pizza and craft beer. They call their positioning “contemporary, high-quality, casual plus”. Their restaurants gener-ate industry leading average unit volumes and guest traffic.

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Excellent Quarterly ResultsBJ’s reported Q1 2015 results on April 23. Revenues of $225.1 million were up 9% year over year owing mainly to an improvement in comps. Comp sales of 3.2% represented their best comp sales performance since Q2 2012, driven by a posi-tive traffic gain of 1.5%, which was ahead of the industry by about 200 basis points.

Adjusted earnings of $0.36 per share beat the Zacks Consensus Estimate of $0.28 per share and were up about 80% from the year-ago figure of $0.20 per share.

A number of steps taken recently such as introduction of a new menu in February 2014, simplifying kitchen processes under project Q and cost control initiatives appear to be delivering results.

Positive Earnings Estimate RevisionsAs a result of strong quarterly report, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $1.40 per share and $1.69 per share respectively, up from $1.31 per share and $1.64 per share, 60 days ago.

Rising estimates sent the stock back to a Zacks Rank#1 (Strong Buy) last month. In fact since the beginning of this year, BJRI has maintained Zacks #1 or #2 Rank. The company has beaten Zacks Consensus Estimate in each of last four quarters, with an average quarterly surprise of 46%.

Strong Growth StoryWith a unique position in the hyper-competitive bar and grill segment and a viable business strategy, BJ’s Restaurants is one of the strongest growth stories in this space. With improving consumer spending, several menu initiatives to drive comp sales and operational infinitives to cut costs, the company remains well positioned to maintain its growth momentum.

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Significant Expansion PotentialThe company sees an estimated expansion potential of 425+ restaurants in the longer term as with just 159 restaurants locations as of now, they are signifi-cantly less penetrated than peers. The company opened two new restaurants during the reported quarter and plans to open at least 15 restaurants in 2015.

Project Q Initiative Improving MarginsThe company’s Project Q initiative is helping it to curtail costs as well a well as boost the top line. The project has resulted in eliminating unnecessary kitchen complexity, expanding kitchen capacity for menu enhancements and improv-ing efficiencies.

Further, the company also aims to enhance restaurant return by starting smaller 7,400 square foot prototype restaurants that reduce investment cost by approx-imately $1 million. With “Kitchen of the Future” that enhances productivity, these new restaurants are expected to generate higher margins.

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Returning Cash to ShareholdersUnder the share repurchase program authorized in April 2014, the company has repurchased approximately 3 million shares for approximately $107 million and approximately $43 million remains to be used under this authorization. These buybacks will provide additional support to the stock.

The Bottom LineWith a healing labor market and declining oil prices, consumers are now much more willing to spend on high-quality casual dining. Thanks to favorable industry trends, a diversified business model and several steps taken recently to improve its processes, the company is moving in the right direction. The Restaurant industry is currently ranked 53 out of 265 Zacks industries (top 20%), indicating further upside potential for this hot industry.

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255 Stocks to Double

Zacks’ long-term investor service targets under-the-radar companies with over-the-top +50% or +100% potential. But it’s ever watchful to prevent strike-outs by cutting losers and providing diversity. The key is pinpointing strong Zacks Rank companies with potential to grow past the normal one-to-three-month profit zone. Learn more...

Income Plus InvestorZacks introduces a new approach to income investing. It’s designed to balance more aggressive moves with a steady flow of income. Selected high dividend stocks plus other low-risk assets replace fixed-income investments that lose to inflation. Learn more...

Insider TraderThis service follows officers, directors and substantial owners who have just dug deep into their own pockets to make stock purchases in their own companies. Then it filters the stock through the Zacks Rank timeliness and valuation factors to find a handful with potential for the most extreme price gains. Learn more...

International TraderWhy restrict your profit search to the U.S., which generates less than 22% of the world’s GDP? Directed by Chief Equity Strategist John Blank, Ph.D., this service offers extreme upside potential and protection against domestic downturns. It rides tailwinds of stock valuation discounts and booming economies relative to the U.S. with selected ADRs and ETFs for stocks, bonds, currencies, and more. Learn more...

Market TimerSmall market swings, up or down, can lead to big profits. The new Zacks Market Timer detects early signals through technical patterns, investor sentiment, global macro trends, and Zacks Rank data. Then it uses leveraged ETFs to multi-ply gain potential. Learn more...

Options TraderKevin Matras infuses options trading with the +26% yearly gain power of the Zacks Rank plus his own market-beating stock screens. This creates the potential for steady and substantial returns using only a fraction of the money you would

Page 26: Contents › adv › 5s2d_201506.pdf · We sifted through stocks that met Zacks Rank criteria and then chose the crème de la crème. Each of the five stocks has unique qualities

265 Stocks to Double

have risked on regular stock purchases. Learn more...

Reitmeister Trading Alert The Reitmeister Trading Alert is Zacks’ answer to today’s volatile market. It uses the power of the Zacks Rank, combined with value trading and a dash of market timing, to generate profits no matter what the market has to offer. Learn more...

Research WizardThis powerful screening and backtesting software puts you in control of your invest-ment strategy. Use the same tool professional stock pickers use to find winning stocks in any market. Learn more...

Surprise TraderZacks’ research breakthrough isolates the most accurate analyst “whispers” to detect positive earnings surprises before they’re reported. The strategy’s tested accuracy is an unprecedented 77.32%. When alerted to “surprise stocks” before Wall Street can react to them, you can fully ride their price pops. Learn more...

Top 10 Stocks This annual stock portfolio provides the best group of 10 stocks to invest in during the year. The list is announced in January each year. We start with the Zacks Recommendation - a market-crushing measurement for long-term success - and use a nine-step process to hand-pick the 10 stocks you should buy and hold all year for effortless profits. Click here for the 2015 edition.

Value Investor This long-term service combines value criteria with Zacks Rank timing. We’ll track undervalued companies until the market starts to see their real worth. Then we’ll “pounce” for gains that can build for years. Learn more...

Zacks Method for Trading Learn how to use the Zacks Rank even more effectively than professional fund managers, with simple step-by-step instruction. Learn more...

The return numbers presented assume no transaction costs. Details of how Zacks calcu-lates performance for the Zacks Rank Portfolios and strategies is available at: http://www.zacks.com/performance.