Professional Documents
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Using Earnings
Analysis as an
Investment Tool
Presenter:
MITCH ZACKS
Portfolio Manager
Zacks Investment
Management
Zacks Research
One of the largest independent research companies, created in 1978
Specializes in and utilizes earnings revisions in its investment process
Zacks Indices
Focus on Zacks experience in earnings analysis
Zacks Rank (Quantitative) Ranks stocks based on earnings revisions
Zacks Quality (Qualitative) Analyzes the amount of non-cash component, or accruals*,
in a companys earnings
Zacks
Rank
Qualitative model
Zacks Quality
Risk
management
Liquidity and
diversification
screens
Zacks
Earnings
Indices
*Accruals are accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many
others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense (Investopedia).
2.0%
Negative revisions
Positive revisions
1.0%
0.0%
-1.0%
0
10
20
30
40
50
Days after forecast revision
60
70
80
90
Source: ETF Securites. "The efficiency of earnings forecast pricing," 2014, Hsu & Jin. "Analysts Forecast Revisions and Market Price Formation," 2002, Gleason & Lee. Data
analysis periond: 01/02/1994 thru 12/31/2008.
Step 2: each stock is rated from Strong Buy (1) to Strong Sell (5)
DISTRIBUTION OF
Source: Zacks
Investment
Research. The
ranking model is
determined
daily using the
same
distribution
percentages.
$
$
$
$
Company A
1,000,000
800,000
200,000
200,000
$
$
$
$
$
Company B
1,000,000
800,000
200,000
1,000,000
(800,000)
Index is not
exposed to a
specific sector
or a specific
stock
Zacks distinguishes 16
specific sectors
Stocks selected
based on Zacks
Rank model and if
necessary by
Zacks Quality
model
Zacks Large Cap Objective: The Fund seeks to track the price and yield performance, before fees and expenses, of the Zacks Earnings Large-Cap U.S. Index.
Zacks Small Cap Objective: The Fund seeks to track the price and yield performance, before fees and expenses, of the Zacks Earnings Small-Cap U.S. Index.
Appendix
Franchise Bias:
Implementation:
Conservatism:
Herding:
All revisions
were positive
Score A
Stock Y
Stock Z
No trend
Score C
All revisions
were negative
Score E
Important Information
An investor should consider the investment objectives, risks, charges and expenses of the ETF carefully before investing. To obtain a prospectus containing this and other
important information, call 1-212-918-4954 or 844-ETFS-Buy (844-383-7289) or visit www.etfsecurities.com. Read the prospectus carefully before investing.
Fund Risk There are risks associated with investing including possible loss of principal. The prices of the securities in which the Fund invests may decline for a number of reasons, including
in response to economic developments and perceptions about the creditworthiness of individual issuers. The Fund does not attempt to outperform its Index or take defensive positions in
declining markets. Past performance does not guarantee future results. There can be no assurance that the Funds investment objective will be achieved. Please read the Funds prospectus
for specific details regarding the Funds risk profile.
The Fund is not sponsored, endorsed, sold or promoted by Zacks Investment Research, Inc. (Licensor). Licensor makes no representation or warranty, express or implied, regarding the
advisability of investing in securities generally or in the Fund particularly or the ability of the Zacks Earnings Large-Cap U.S. Index (Index) and the Zacks Earnings Small-Cap U.S. Index to
track general market performance. Licensors only relationship to ETF Securities Limited (Licensee) is the licensing of the Index that is determined, composed and calculated by Licensor
without regard to the Licensee or the Fund. Licensor has no obligation to take the needs of the Licensee or the owners of the Fund into consideration in determining, composing or calculating
the Index. Licensor shall not be liable to any person for any error in the Index nor shall it be under any obligation to advise any person of any error therein.
The Fund is a new product and any performance prior to the date of index inception is hypothetical.
The inception date for Zacks Earnings Large-Cap U.S. Index and the Zacks Earnings Small-Cap U.S. Index is 10/01/14.
Important Information
The Russell 1000 Index is a capitalization weighted index that measures the performance of the 1,000 largest U.S. companies based on total market capitalization. The S&P 500 Index is a
capitalization-weighted index of 500 stocks selected by the Standard & Poors Index Committee designed to represent the performance of the leading industries in the U.S. economy.]
The Russell 2000 Index is a capitalization weighted index that measures the small cap segment of the U.S. equity universe, selecting stocks ranked 1001-3000 by market capitalization from
the Russell 3000 Index. The S&P 600 Index is a capitalization weighted index of 600 stocks selected by the Standard & Poors Index Committee designed to represent the performance of the
small-cap segment of the market. Data source: ETF Securities, Bloomberg, Zacks. ETF Securities Funds are distributed by ALPS Distributors, Inc.
For institutional use only.
Thank You.
Questions?
Using Earnings
Analysis as an
Investment Tool
Presenter:
MITCH ZACKS
Portfolio Manager
Zacks Investment
Management