Clever Ticker Symbols

Do stocks with clever ticker symbols outperform or underperform the overall market? Do investors interpret such symbols as silly marketing ploys or will they recall memorable ticker symbols when they are contemplating which stocks to add to their portfolio? Well, these are the questions that Professor Gary Smith at Pomona College in California asked himself. I recently stumbled upon his paper that investigated the performance of stocks with catchy tickers during the years 1984 to 2004.

Mr. Smith sent 100 current undergraduate students, recent graduates and nonfinance faculty a list of 358 ticker symbols, with the company names, a brief description of the company’s business and instructions to please select 25 that are the cleverest, cutest and most memorable. The professor received 22 responses with 82 stocks receiving more than two votes. This portfolio was subsequently compared to a Nasdaq/NYSE index portfolio. As far as the performance results? Cue the drum roll…

The clever-ticker portfolio not only outperformed the market portfolio, it did so by a substantial and statistically significant margin. It produced a 23.6% annual compounded return, while the Nasdaq/NYSE portfolio generated a 12.3% annual compounded return. Overall, 51 of the 82 clever-ticker stocks outperformed the Nasdaq/NYSE index.

Mr. Smith concluded his paper by stating that he really does not know why these stocks performed so well. Several hypotheses can be drawn. In any case, I found the study to be quite interesting, not to mention entertaining. I decided to go through his list (as well as a few others) and identify which, if any, of the stocks currently have either a Zacks Rank of 1 (strong buy) or 2 (buy) and/or a Zacks Recommendation of Buy. The companies are displayed below.

Sotheby's (BID - Snapshot Report)

Sotheby's engages in art auction, private sales, dealer and art-related financing activities. The company operates in 35 countries, with principal salesrooms located in New York and London. BID also regularly conducts auctions in 13 other salesrooms around the world, including Australia, Hong Kong, France, Italy, the Netherlands, Switzerland and Singapore.

On May 7, BID reported first-quarter profits of 25 cents per share, compared to a loss of seven cents per share in the prior-year period. With analysts calling for only six cents per share, the company posted a very impressive 316.7% positive earnings surprise. BID has now beaten analysts’ earnings expectations in eight out of the past nine quarters, including five double-digit percentage surprises. Revenues came in at $147.4 million, compared to $96.0 million in the first quarter of last year. The company’s auction sales increased to $129.8 million from $89.5 million.

The consensus earnings estimate for this quarter currently sits at $1.51, an 18-cent improvement when compared to the consensus of 30 days earlier. All three of the covering analysts raised their estimates. Profit forecasts for this year have also risen by 18 cents to $2.63 over the past month, with all three covering analysts upping their estimates. BID has a current dividend yield of 0.79%. The company is currently a Zacks #1 Rank stock and has a current Zacks recommendation of Buy.

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The Boston Beer Company, Inc. (SAM - Snapshot Report)

The Boston Beer Company, Inc. produces malt beverages and hard cider products primarily in the United States. The company offers beers primarily under the Samuel Adams brand name, flavored malt beverage products under the Twisted Tea brand name, and cider product under the HardCore Cider brand name. SAM sells its products primarily in the United States, as well as in Canada, Europe, the Caribbean and the Pacific Rim.

On May 8, SAM posted first-quarter earnings per share of 40 cents. Compared to 13 cents per share in the prior-year period, the result represented a 207.7% year-over-year improvement for the company. It also equated to a 73.9% positive earnings surprise with the Street expecting only 23 cents per share. The company has now topped analysts’ expectations in seven out of the past nine quarter, producing six double-digit percentage surprises and one triple-digit along the way. Revenues jumped 27.1% to $79.7 million from $62.7 million in the first quarter of last year. The company stated that it sold nearly 400,000 barrels of its beverages, or 22% more than what it sold in the prior-year period.

The consensus earnings estimate for both this year and next are each up a penny to $1.59 and $1.82, respectively, over the past 30 days. One of the three covering analysts submitted a positive revision for both this year and next. Earnings per share are projected to grow 12% over the next 3-5 years, while the industry is expected to grow at an 11% clip. SAM is currently a Zacks #1 Rank stock and has a current Zacks recommendation of Buy.

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Anheuser-Busch Companies, Inc. (BUD - Snapshot Report)

Anheuser-Busch Companies, Inc., through its subsidiaries, engages in the production and distribution of beer. The Domestic Beer segment offers beer under the Budweiser, Michelob, Busch and Natural brand names. The segment also offers specialty beers, non-alcohol brews, malt liquors, specialty malt beverages, energy drinks, ale and malt-based products, such as caffeine, gingseng, and guarana. BUD also operates nine theme parks (Busch Gardens, Sea World, Discovery Cove, Sesame Place).

BUD has a leading position in the U.S. beer market, with 48.4% overall share in 2006. The company sells 2.5 times the volume of the second-largest brewer. Having such a dominant position enables the company to benefit from economies of scale. Moreover, BUD is expanding internationally by investing in leading brewers in growing markets. Management believes that additional creative ideas, increased media spending, stepped-up premise activities and targeted price promotions will lead to top-line growth in the coming quarters.

Management has enhanced shareholder value through both share buybacks and dividends. BUD repurchased almost 17 million shares in 2006. Furthermore, late last year, the Board of Directors authorized a new 100 million share buyback plan. The company’s dividend was increased by 9.3% in July 2006 to 29.5 cents per share. It represented the 29th straight year management has raised the company’s dividend. BUD is currently yielding 2.34% and has a five-year average dividend yield of 2.00%.

On Apr 25, BUD reported first-quarter earnings of 67 cents per share. The result was up 4.7% year-over-year but missed expectations by two cents. Consolidated net sales climbed 2.7% to $3.86 billion. U.S. beer sales increased 3.6% and international beer sales jumped 8.5%. Revenues at the company’s Entertainment division advanced 8.4%. Higher attendance and higher ticket pricing fueled the solid result. BUD has a current Zacks recommendation of Buy.

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Additional Resources

• Research Digest reports (Premium) summarize the full body of research done by brokerage firms for a particular company and is available for (BUD)
• All Research Digest Reports
• All Zacks Equity Research Reports
• Zacks Rank in Industry (Premium) helps you locate the best stocks in a particular industry as judged by the Zacks Rank:
• BID—Zacks Rank in Industry: Business Services
• SAM—Zacks Rank in Industry: Beverages-Alcohol
• BUD—Zacks Rank in Industry: Beverages-Alcohol
• The Zacks Industry Rank, by leveraging the power of earnings estimate revisions, helps you find industries with improving earnings prospects:
• Zacks Industry Rank: Business Services
• Zacks Industry Rank: Beverages-Alcohol