Guru Grades

Ben Zacks: The Zacks Way (Last Updated 8/4/06)

We evaluate here the market commentary of Ben Zacks over the period June 2002 through January 2005. Ben Zacks is the is the co-founder of Zacks Investment Research. Since January 2005, Zacks.com has discontinued making his regular commentary publicly available (and removed his past commentary). The chart below extracts highlights from this commentary and shows the performance of the S&P 500 index over the 5, 21, 63 and 254 trading days after the publication date for each item. Red plus (minus) signs to the right of specific items indicate those that the market has subsequently proven right (wrong). We conclude that:

• Ben Zacks relies mostly on the aggregate corporate earnings trend to forecast the direction of the market. However, market indices can be slow to respond to aggregate earnings changes. He is not notably accurate in predicting earnings trends.
• With respect to market timing, Mr. Zacks recognized the market bottom in late 2002 but was slow by several months in committing to the 2003 upswing. On short to intermediate term calls, he is sometimes right and sometimes wrong.
• Based on subsequent stock market performance and our judgments about the accuracy of Ben Zacks' market direction forecasts, his bottom-line advice about market direction has been right 50%, about average. The forecast sample size for Mr. Zacks is small, as is our confidence in this conclusion.
• Like many other investors, Mr. Zacks tends toward conventional pessimism, rather than contrarian opportunism, when something (like Iraq) rocks the boat.
• Even though the source of Mr. Zacks' public commentary has been discontinued, we retain this evaluation as part of the overall study of stock market forecasting.

In summary, Ben Zacks' focus on earnings analysis makes him only an average market forecaster. Confidence in this conclusion is low.

For other comments related to the Zacks system, see our blog entry of 7/17/05.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.

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