Is Zacks Income Investor Really Worth It?

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Is Zacks Income Investor really worth it?

What are Zacks Income Investor stock recommendations?

How have these income stock picks performed so far?

Are there any other better alternatives to Zacks Income Investor?

After trying out Zacks Income Investor, Let me share with you my experience and help you make an informed decision.

Zacks Income Investor Stock Picking Strategy

Zacks Income Investor is a stock-picking service provided by Zacks Investment Research.

Zacks Income Investor’s editor is Byan Hayes.

So, how does the Zacks Income Investor team help you pick the best income-generating stocks?

Bryan Hayes and his team are looking for companies that have sound fundamentals and return their cash to the shareholders.

He avoids just focusing on dividend yield because there are a lot of stocks with very high dividend yield but have very poor cash flow or no growth prospects.

To pick good dividend stocks, he uses the Zacks Rank to find companies with both a strong dividend yield and stable-to-improving earnings estimates.

This is because rising earnings mean higher cash flows and a greater ability to pay more dividends.

The best kind of companies he is looking for are companies that generate a lot of free cash flow and increase dividends year after year.

Here’s what you can expect from their stock analysis of a “buy recommendation”.

The reasons for buying Costco are the following:

• Zacks Rank #2 (Buy)
• Zacks Industry Rank in the top 39% out of approximately 250 industries
• Dividend has been raised consistently in the past decade
• Recent price decline (i.e. stock becoming cheaper)

As you can see, the stock analysis is quite simple and they relied a lot on Zacks Rank and Zacks Industry Rank to pick stocks.

Two months later, it was recommended to sell Costco at a loss of 15.4% because Bryan believed that the stock was going to drop further in the short term purely based on the stock price action on the chart.

Short-term price volatility is part and parcel of investing.

Personally, I don’t like to get in and out of my positions so quickly because that is short-term trading not investing.

For dividend stocks, I prefer to buy and hold high-quality ones to get paid dividends every year instead of getting out of the stocks quickly amid market volatility.

If it is a good high-quality company, it is highly likely the stock price will go up in the long term.

This is the price chart of Costco after Bryan cut losses at $458.17 in Oct 2022.

I believe that you can simply use any good stock screener to find stock ideas like this by choosing metrics such as dividend growth rate, dividend payout consistency and analysts’ earnings estimates increasing.

For example, Stock Rover provides the most comprehensive fundamental stock screener for the US and Canadian stocks.

Seeking Alpha has a very powerful proprietary quantitative stock rating system that gives grades “A” to “F” stocks on “value”, “growth”, “profitability”, “Momentum” and “Earnings Revision”.

On top of that, Seeking Alpha also makes it easy for you to research and pick dividend stocks by providing ratings on each of the following:

• Dividend Safety
• Dividend Growth
• Dividend Yield
• Dividend Consistency

Zacks Income Investor Stock Picks & Portfolio Performance

Zacks Income Investor Portfolio started in 2012.

Here are the five top stock picks over a period of 11 years from 2012 to 2023:

• Microsoft: 251.13% (closed trade)
• Nucor Corporation: 205.49% (closed trade)
• Innovative Industrial Property: 188.33% (closed trade)
• Lockheed Martin: 150.87% (closed trade)
• Washington Trust Bancorp: 123.33% (closed trade)

From 2012 to 2023, there were a total of 196 closed trades with 106 winning trades (54%) and 90 losing trades (46%).

Out of these 196 trades, there are only 6 stock picks that have achieved more than 100% return.

The S&P 500 market index rose about 240% from the beginning of 2012 to 19th Oct 2023.

The biggest gain is 251.13% in Microsoft which was held for almost 4 years from 28th Oct 2016 to 7th July 2020, while the biggest loss is -76.32% in Seagate Technology which was held for 5 months from 5th March 2012 to 13th August 2012.

By the way, this biggest losing trade was a SHORT position, which means it is betting the stock price to go down.

It seems that Zacks Income Investor stopped going short on stocks from 2013 onwards.

The second biggest loss was -51.11% in Innovative Industrial Property (a long position) which was held for about 20 days from 27th Feb 2020 to 18th March 2020.

About two months later, Innovative Industrial Property was bought back and later exited at a return of 188.33%.

Other than that, the losses were mostly limited to less than 30%.

Assuming equal weighting on all these closed trades, the average return of each closed trade is about 14.45%.

It’s quite difficult to compare Zacks Income Investor portfolio performance against the S&P 500.

Here’s why.

The performance of Zacks Income Investor in the starting year of 2012 was quite bad.

If we assume there is no additional capital injection into the account, it’s going to be very difficult to just make back the loss incurred.

As shown in the “risk of ruin” table below, if you lose 50% of your capital, you would have to have a 100% gain to just recover your loss.

So, it might take a few years to just make back your initial loss if you don’t add more capital to your portfolio.

On the other hand, if you invest all your money in the S&P 500 at the start of 2012 (without adding any more capital), you would have a total return of about 240% by Oct 2023.

So, how have Zacks Income Investor stock picks in 2023 performed so far?

As you can see, for the year 2023, there were a total of 10 stock recommendations with 4 losing trades and 6 winning trades.

The maximum gain is around 46% while the maximum loss is around 14%.

So, the performance for 2023 is positive year to date.

As of 19th Oct 2023, the S&P 500 is up 12.8% year to date while Nasdaq is up 28.18% year to date.

Zacks Income Investor Weekly Commentary

Zacks Income Investor’s weekly commentary is quite short and simple.

It starts with a simple market summary that talks about the market index performance and the recent economic data and news such as earnings reports, retail sales, inflation, interest rates, and Fed officials’ opinions.

Then, it gives a brief portfolio summary that covers the performance of each position in the portfolio for the week.

If there are any earnings reports on any of the existing stock positions, it will talk about the earnings results briefly.

Also, if there is any new stock recommendation, it talks briefly on the new stock and why it is being recommended.

Zacks Income Investor Pricing

So, how much is Zacks Income Investor?

Zacks Value Investor is sold as part of the Zacks Investor Collection which gives you buy and sell alerts from 7 different investor portfolios including Zacks Income Investor.

Zacks Investor Collection costs $59/month or 495/year.

There are other more affordable options in the market such as Seeking Alpha and Stock Rover to find income-generating stocks.

Do I think it is worth buying the Zacks Investor Collection?

I don’t think the performance of Zacks Investor Portfolio is fantastic enough to justify the investment.

Also, I don’t feel confident enough to just buy any of the stocks recommended after reading the simple stock analysis. It’s not an in-depth and comprehensive analysis that includes both the positive factors and potential risks.

Lastly, I think you can easily replicate the stock selection process by using good stock screeners such as Seeking Alpha and Stock Rover.