Zacks' Voice of the People highlights opportunities with Campbell Soup, CVS Caremark and Micros Systems - Press Releases
February 01 2012 - 3:30AM
Zacks
For Immediate Release
Chicago, IL – 02/01/2012 – Zacks highlights commentary from
People and Picks Trader
“JohntheWizard”.
For more Voice of the People, visit
http://at.zacks.com/?id=5851
Featured Post
Evidence of Estimates, Revisions Moving the
Market
Just surf for the words “anomaly and excess
returns.”
I keep reading that there is plenty of evidence that forecasted
analysts’ expectations over the coming year have long been proven
to be a significant anomaly (=abnormality) of
giving excess returns; and that there are others concerning
EPS forecast, Dividend forecast, and surprise forecast. Zacks
emphasizes it is more the revisions of those forecasts (=estimate
revisions) that move the share prices.
Most of the evidence dates from before 2000. Despite black
Monday in 1987, practically every trading strategy worked in the
eighties and nineties. Excessive in this world means some 5% above
the benchmark. The benchmark (S&P500) compounded 14%/year
during those days, 17%/year including dividends. Excessive returns
were thus of the order of 22%/year. Those were the
days.
The best 30 of the 85 stocks I selected back in April on the
basis of what Mo and JaiH considered as safe stocks compounded
28%/year during those days, truly abnormal and excessive.
During the past four weeks of the MarketWatch fantasy
contest, the benchmark rose 4.7%. Abnormally excessive
returns should have been of the order of 5%/4wks. The best of the
1250 contestants compounded less than 2%. The best 30 of our 85
stocks did 2.7%/4wks.
If you just make a watch list of stocks that, like
Apple, kept year-over-year increasing their Net Earnings during the
past eight years and take the best 30 of those 122 stocks,
these best 30 compounded 9.7%/4wks. Those are truly abnormal
returns during those past 4 weeks.
Such a watch list can be easily made putting that query of 8
years of y-o-y increasing Net Earnings in Research Wizard. During
the past 32 years, these weekly rebalanced best 30 stocks
compounded 29%/year with a maximum drawdown of -32%.
Now here is the true winner of these past four
weeks. If you would have taken the best 30 of the Zacks
Rank #1 stocks, you would have made 10.4%, truly abnormally
abnormal! With these same selection criteria applied during the
past 12 years (the maximum time span that RW allows you to take),
these 30 best stocks compounded 50%/year with a maximum drawdown of
-51%.
Since the onset of the credit crisis, October 12, 2007, these 30
best made 20%/year, however with that risk of -51%. The 30 best
Apples compounded 32%/year with much less risk of -27%. The best 30
of these 85 safe stocks selected here at P&P compounded
23%/year with a risk of -18%.
So take your picks that suit you best. But remember, these are
just gaming scenarios. Zacks Ranking works only that well for small
caps that only allow for relatively small investments with abnormal
risks. Practically no person in this world is ready to take hits of
-50%.
And there is pretty solid evidence that any form of stop-loss
system during holding periods for your individual picks worsens the
risks and performance. In addition, one-day slippage often takes
-5%/year of the performance and deteriorates the risks. The 12
picks I show this week at P&P are just the 12 best of the
Apples of this world.
I am seriously interested in finding the cause of these
abnormally excessive returns. The techniques for identifying
causality in historical data using computational finance are
controversial at best. Can someone help me on this point?
The most recent picks by «JohntheWizard» are:
A buy rating on Campbell Soup ( CPB),
a buy rating on CVS Caremark ( CVS) and
a buy rating on Micros Systems (MCRS).
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Contact: Brent Billock
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CAMPBELL SOUP (CPB): Free Stock Analysis Report
CVS CAREMARK CP (CVS): Free Stock Analysis Report
MICROS SYS (MCRS): Free Stock Analysis Report
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