Zacks Investment Research, Inc. | 10 S. Riverside Plaza, Suite 1600 | Chicago, Illinois 60606

www.zacks.com/ultimate/shortlist

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Contents

Introduction 2

Section 1: The Mental Aspect 4

Section 2: Getting the Most Out of the Zacks Short List 5

Section 3: Follow the Leader 7

Section 4: How to Read Zacks Short List Alerts 8

Section 5: How to Read Zacks Short List Summary 9

Section 6: Virtues of Money Management 10

Section 7: Tying it All Together 11

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Introduction

Congratulations on getting started with the Short List.It’s been said that in bull markets roughly 70% of stocks go up. This can be categorized under

the ‘rising tide raises all ships’ phenomenon.

But when the bull market stops, or begins to falter, those percentages begin to shift.

And when the bear market hits, now all of a sudden 70% of stocks are going down. And

usually it’s a lot worse than that.

There are always some stocks going up. And those select few that will do well in any market

condition. But sometimes, the best way to make money when the market is going down is to

short stocks.

And that’s where the Zacks Short List comes in.

Making Money When the Market is Going Down

Most investors only buy stocks (go long) in hopes of making money when the stock goes up.

You buy at one price, and hope to sell it later at a higher price. (‘Buy low and sell high’, or ‘buy

high and sell higher’. Either way the principle is the same.)

A person who profits as the stock goes down sells the stock first (goes short) and then buys

it back later at a lower price. (The same ‘buy low, sell high’ mantra applies – although in this

case, it’s reversed. You sell high first, and then buy it back lower later.)

I should point out that you don’t need a bear market to sell stocks short. You can ‘short’ a stock

at any time. Simply put, if you feel a stock is set to go down, you can open a short position and

make money as it tumbles.

Of course, short-selling isn’t for everyone. And you do have to specifically set up your brokerage

account to do it (retirement accounts are not eligible). But it’s quite easy. All you have to do

get approval for a margin account. Consult your brokerage for specifics on shorting in your

account.

Quite frankly, even if someone wasn’t planning on actively shorting stocks, having a service

that can spot which ones are ripe for a fall can save an investor money by getting out if they’re

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currently long, or staying out if they were considering buying it.

Cracks in the Market

The bear market of 2008 (which didn’t officially begin until July 2008 when the market

pulled back -20% from the highs) thru March 2009 (when the bear market officially ended by

climbing 20% from its lows); was the worst bear market in recent history. It was a brutal sell-

off and there was virtually no place to hide.

However, the short-sellers cleaned up.

While the S&P 500 lost -33.8% during that time, the Short List strategy gained 69.3%. On

a hypothetical $100,000 investment, that’s the difference between losing -$33,800 and

potentially making $69,300.

Actually, the market started showing its cracks in October 2007, and proceeded to fall 20%

over the next 10 months, before officially ringing in the new bear market. From its highs, the

S&P fell a staggering -57.69%.

Since then, the market has put in an extraordinary rally, gaining over 200% over the last 7

years.

But, once again, cracks are beginning to show. Those cracks weighed on the S&P in 2015 with

only a 1.4% gain. But the Short List was up 13.7%.

Get On the Short List

Some of the best candidates for short-selling are those that are overvalued, overleveraged,

and underperforming on their growth outlooks. And, of course, those with a Zacks Rank #4

or #5 Sell or Strong Sell (and even some #3 Holds).

These are the exact opposite of things you would want in a stock to buy, but some of the ideal

qualities for stocks to sell short.

Each week, the Short List strategy selects the 10 stocks with the greatest likelihood to fall, so

you can get in and make money as they do.

Whether you plan on adding some shorts to your current portfolio to hedge your downside

risk, going all short when the next bear market hits, or just want to make sure the stocks

you’ve bought don’t show up on this list -- having a good bearish strategy at your disposal is

a great tool to have. And you don’t want to be scrambling to find something that works when

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the bull market ends.

That may just be the best benefit of all; the realization that you don’t always have to be in a

bull market to make money. Being able to profit when the market goes down can transform

your portfolio.

Before you begin, please be sure to read the rest of this guide. It will help you get the most out

of this service. If at any time you have any questions or comments, please feel free to contact

us. We want to hear from you.

Thanks again. And good trading.

Sincerely,

The Short List

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Section 1:

The Mental Aspect It is important to realize how much investment success is related to what goes on between

your ears. There are so many ways to get distracted and question yourself while trading. You

must be in the right frame of mind and have reasonable expectations to achieve success, with

this or any investment service. Be sure to pay attention to the tips in this section carefully; they

will get you headed in the right direction.

Shorting stocks is a different ballgame than most investors are used to. If you don’t feel

comfortable shorting individual stocks, we have plenty of services that are able to take

advantage of down-trending markets. Contact your account manager for more details at

ultimate@zacks.com.

NOBODY IS 100% PERFECT

First of all, there will be losing picks, but if we cut them out early to minimize losses and

maximize gains on winners, we can achieve phenomenal results.

A little known fact is that the Zacks Rank, even with its 26% annual return, is only right 56%

of the time. We are extremely confident that over time we will produce substantial returns,

but it is important that you learn to take the losing picks in stride.

COMPOUND YOUR RETURNS

Zacks Short List uses the Zacks Rank and a proprietary blend of indicators to determine exactly

when to sell short and then buy back. These attributes should produce exceptional gains over

time. However, while there will be some big winners, we will also be looking for consistent

smaller gains that will really add up over time.

This is what we call the beauty of compounding and how it works to an investor’s advantage.

Albert Einstein is said to have called compound interest the eighth wonder of the world and

this is a prime example. So don’t get discouraged when you are “only” seeing small gains on

each respective trade, because that is exactly what this product is designed to do.

TIMELINESS INCREASES ROI

So let me ask you a question. Would you rather make 10% or 20% on a trade?

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Yes it’s a trick question. The missing piece of the puzzle is how long each trade was held. So

now let’s say that the 10% gain was made in 3 months time, which computes to a 46% annual

return. Whereas the 20% winner took 2 years to achieve and is really only good for a 10%

annual gain.

This example solidifies the power of timely stock trading that we will harness with this service.

Most often we will be holding on for only a few days or weeks and stringing together a series

of smaller winners. But from time-to-time we will let winners run longer or cut losers early

when necessary.

Section 2:

Getting the Most Out of Zacks Short List It is our job to provide you with timely and profitable picks, but there are steps that you can

take to ensure your success with Zacks Short List. Here are a few things you can do to get the

most out of the product.

1. Read this guide carefully

� This guide is your friend. It has valuable information on how to use the product and

succeed with the assistance of Zacks Short List.

� It gives you step-by-step instructions on how to receive alerts and what to do when

you receive them.

� It has important money management tips.

2. Have a working email address

� This is necessary to receive investing alerts. Make sure you can access your email in

a timely fashion because acting on these picks is essential to success.

� The Daily Summary email will be sent at 8:00 p.m. EST, which summarizes the

positions as well as what happened on Wall Street during that trading day.

� Intra-day trading alerts, while rare, will typically be sent within the first hours of the

trading day.

� Unfortunately, many Internet service providers have software programs that filter

out emails you want to receive, like Zacks Short List Daily Summaries. To get optimal

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delivery of our emails follow this link for quick and easy instructions.

3. Have an online trading account

� We are not advocating any particular company for this, but ideally lower commissions

will help you achieve a higher overall return. You could make several trades over

the course of a year, and high commissions can really eat into your profit margin,

especially if you have limited capital.

4. Access the site

� To access the site, go to https://www.zacks.com/ultimate/shortlist and enter your

username and password. This will take you to the main page where you can view

the portfolio, any pending trades, and the commentary.

Section 3:

Follow the LeaderThe process to receive our trades is very simple, yet we feel it is so important that we are going

to spell it out for you. Here are the four steps:

� Receive the email with the daily summary or intra-day signal

� Read the email to determine appropriate action

� Place trades through your broker

� Follow the emails to determine when to sell

ACT PROMPTLY = MOST SUCCESS

And if you don’t beat the market, you can take advantage of our 100% Money Back Guarantee.

SPEAKING OF THE GUARANTEE..........

We feel that if we are not able to live up to our word and help you beat the market then we

shouldn’t be deemed worthy enough to take your money. So in addition to the 90-day, no

hassle guarantee, there is a 100% Money Back Performance Guarantee.

There are a few conditions that have to be met first, but the bottom line is that we have to

perform. Click here for details.

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Long and Short

This is going to be a short only service. Some of you cannot or do not want to participate in

short-selling. That is completely understandable. For this reason the majority of our other

services offer inverse index ETF recommendations.

Section 4:

How to Read Zacks Short List AlertsFrom time-to-time, this strategy will have a trading alert during the trading day. When a Buy

Alert, Sell Alert, or Intraday Alert is sent out, you should receive the alert within the first hours

of the trading day detailing what stock is being bought or sold and the rationale behind the

move. It is important that you act as soon as you can. Here is an example:

Subject line = The type of alert. The subject line of the email will say Buy, Sell, or Intraday Alert.

Company Name = The name of the company

that is being added to or sold from Zacks Short

List portfolio.

Symbol = Ticker symbol of stock being added to

or deleted from the portfolio.

Date Added = The date on which the stock was

added to the portfolio.

Long/Short = Denotes whether the stock is to be

entered as a long or short position. (Since this is

a short only service, our positions will always be

short.)

Zacks Short List Portfolio Commentary = As this is a computer-driven strategy, there will

typically be no portfolio commentary. As special situations arise, commentary may be added

to aid in your trading decisions.

Intraday alerts typically use the average of the price at the time of the alert and the closing

price that day.

Recommendations that use stops or limits will use that price for performance figures.

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Section 5:

How to Read the Zacks Short List Daily Summary The Daily Summary provides a wide array

of details for the portfolio each trading day.

This summary may have new signals as well

as the current open portfolio with daily

commentary. This is valuable information as

it conveys what our game plan is, why we are

in each stock, when to get out and why, as

well as any relevant news. This is emailed to

you around 8:00 p.m. EST. In regards to the

price added for the portfolio, Zacks uses the

average of the price at the open and the

closing price on the day the stock is deleted.

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Section 6:

Virtues of Money Management Money management can be the difference between realizing large gains and going broke,

even if the winning percentage is the same. How can this be? The key point is that winning

investors know to ride their winners and cut their losses quickly, and stick with a plan that has

proven to work in the past.

Here are a few rules that you can follow to further improve your returns:

First of all, don’t dump your entire portfolio into these Zacks Short List picks. Only allocate

that portion of your capital that can be comfortably devoted to speculation.

This portfolio will typically hold around 10 positions. You should be able to sleep soundly and

act rationally if you are only trading with your speculative money.

Keep in mind that reinvesting profits and the power of compounding are your friends in this

portfolio. Those frequent singles add up to be a home-run in the end when the phenomenon

of compound interest works its magic.

EVER-PRESENT CLICHÉ RINGS TRUE

Zacks Short List will have many recommendations coming at you each month. It has been said

millions of times before, but it is so important it needs to be said again:

Don’t put all your eggs in one basket. Even if you are the most brilliant investor in the world,

there will be losing trades. The key is staying in the game and building your equity over time

in a systematic way. This can only be done when diversification is put to use.

Not that we have to remind you, but the main point is that your capital was earned through

years and years of hard work. Capital conservation sounds boring, but without it, you are

fighting a losing battle. We don’t want to see the money you have put your blood, sweat, and

tears into evaporate due to lack of discipline.

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Section 7:

Tying it All Together It is our goal at Zacks to enhance your trading results via Zacks Short List. This booklet touches

upon the details of the service and provides several useful tips to realize the vast potential

that institutional investors hold. We feel it is our job to let you know that we are here to help

you get the most out of Zacks Short List.

Again, let’s go over some of the important points made in this booklet.

� Small Gains Add Up To Big Results

� Not Every Trade Will Be A Winner

� Timeliness Is Of The Essence

� Money Management Matters Greatly

� Have A Working Email Address

� We Are Here To Help

The last point is important as we have free customer support that should be taken advantage

of. Any additional questions that you may have can be answered by just picking up the phone

and giving us a call or emailing us:

1.888.775.8348

(outside the US, 1.312.265.9309)

shortlist@zacks.com