Thursday - July 14, 2005

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Here we cast the spotlight on a timely Featured Expert commentary that recently appeared on Zacks.com. Following the article you will find previews of other profitable commentaries with insights and recommendations from leading investment experts.

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After selling off Thursday morning on news of the terror attacks in London, stocks showed impressive resilience to finish higher on the day. Today investors have plotted a solid jobs report for June, which echoed recent reports suggesting the economy is growing at a healthy pace. If investors gain confidence that economic growth will remain healthy, that inflation is not accelerating, and that bond yields are not headed sharply higher, an upside breakout in the averages would not be surprising. The Dow Industrials need to rally about 4.5% to reach the March high of 10,940.55, while the Dow Transports need to gain about 7.4% to reach the March high of 3876.13. Interestingly, the S&P 500 Index of large stocks is just 1.1% from its March high, while the S&P 400 Mid-Cap and S&P 600 Small-Cap indexes closed at all-time highs today.

More. . .

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FEATURED EXPERTS Continued...

While failure to reach new highs in the Industrials and Transports would be grounds for concern, Richard Moroney and his team see no reason to change their constructive and opportunistic stand. The Dow Theory remains in the bullish camp. Quality stocks are available at reasonable valuations and the broad market is advancing nicely.

 
A Sampling of the Top Picks:

MetLife (NYSE: MET) is a leading provider of insurance and financial services to a broad spectrum of individual and institutional customers. The company currently provides individual insurance, annuities, and investment products. The company also provides group insurance and retirement and savings products and services to corporations and other institutions. The company believes that their unparalleled franchises and brand names uniquely position them to be the preeminent provider of insurance and financial services in the U.S.

Fiserv (NASDAQ: FISV) is one of the leading technology resources for information management systems used by the financial industry. Fiserv provides information management technology and related services to banks, broker-dealers, credit unions, financial planners and investment advisers, insurance companies, leasing companies, mortgage lenders and savings institutions. The company operates centers nationwide for full-service financial data processing, software system development, item processing and check imaging, technology support and related product businesses.

Harris (NYSE: HRS) is an international company focused on communications equipment for voice, data, and video applications. The company structures its operations around five operating divisions, which divisions have been organized on the basis of specific communications technology and markets. For the most part, each operating division has its own marketing, engineering, manufacturing and service organization. The company produces most of the products it sells, except for certain broadcast products sold by the Broadcast Communications Division.

 
About Richard Moroney’s Dow Theory Forecasts newsletter

Get clear Buy, Hold and, yes, SELL advice from one of the nation’s oldest and most successful investment newsletters. Our in-depth analysis and advice have been helping subscribers weather market volatility since 1946. Learn more about this newsletter and free trial offer at: http://at.zacks.com/?id=346.

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MORE FEATURED EXPERTS...
 

b) Contango Oil & Gas Continues Run

Bill Martin and Matt Ragas see potential in a small-cap, oil and natural gas outfit. More...
 

c) Higher Gas Prices Ahead

Richard Rhodes sees higher gasoline prices. Read his outlook and learn about a few long positions. More...
 

d) No Man’s Land

Jack Schannep outlines the possible scenarios occurring once the Transports and Industrials breakout of their trading range. More...
 

e) Two Hurdles Cleared

Jim Collins believes the outlook will be generally upbeat as the economy continues to expand at a moderate pace. More...
 

Featured Expert articles are courtesy of the 60+ leading investment newsletters that have partnered with us to create the Zacks Expert Advice service. Check out the Experts section of Zacks.com daily to find profitable stock picks and timely market commentary at: http://at.zacks.com/?id=637.

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BULL OF THE DAY

Vimpel-Com, ADS (VIP) - Tax Concerns Alleviated.
Full Zacks research report at: http://at.zacks.com/?id=1412.

 
BEAR OF THE DAY

MannKind Corp. (MNKD) - Extensive Competition.
Full Zacks research report at: http://at.zacks.com/?id=1413.

 
ZACKS ANALYST INTERVIEW

Upscale Hotels Live It Up
Revenue per available room (REVPAR) was up in excess of 10% YTD through June. More...

 
ZACKS INDUSTRY OUTLOOK

Transportation Delivers, but Modestly
Although revenue may grow slightly over this year, rising costs should offset most of those gains. More...

 
EARNINGS & SECTOR UPDATE

Second Quarter is Front and Center
Nick Raich expects a 12th straight quarter of double-digit profit growth. More...

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Zacks.com is proud to share with you some of the best trading strategies that truly allow you to Profit from the Pros. Today we highlight…

 
Profit Tracks: Upgrades and Revisions

This strategy focuses primarily on Positive EPS Estimate Revisions and Brokerage Rating Upgrades. Over the last 20 years Zacks Investment Research has proven that “earnings estimate revisions are the most powerful force driving stock prices.” Studies have also shown that stocks receiving upward EPS revisions tend to receive additional upward revisions in the future. Then consider that stocks receiving these upward revisions generally have brokers upgrading their Ratings, which is also a proven mover of stock prices. There are other parameters to this strategy, but the Rating Upgrades and positive EPS Revisions are the two powerful active ingredients.

This screen focuses on EPS Revisions, along with Broker Ratings and Rating Changes. According to Zacks Investment Research “earnings estimate revisions are the most powerful force impacting stock prices”. Couple that with the proven benefits of upgrades in ratings from brokerage firms and you have a strategy with a compounded return of 455.9% over the last 4+ years including +55.7% in 2004.

 
Here are four stocks that make the grade for the Upgrades and Revisions Profit Track

Amedisys, Inc. (NASDAQ: AMED), one of America's leading home health nursing companies and a Zacks #1 Rank (Strong Buy), reported record first-quarter earnings of 45 cents per share in early May. The result marked a positive surprise of more than 15% ahead of the consensus estimate. The company said its record quarterly revenue and net income are indicative of its strong, and ongoing, commitment to both organic growth and selective acquisitions. In addition to logging a solid quarter, AMED brought in earnings per share growth of almost 76% over the past five years. To continue your research on AMED, click here.

ASV, Inc. (NASDAQ: ASVI), who designs, manufactures and sells track-driven all-season vehicles, surprised analysts in late April with first-quarter earnings of 40 cents per share. The result exceeded the consensus estimate by 25% and outpaced last year’s 26 cents. The company noted that this was its fourth consecutive quarter of record sales and earnings. ASVI has also enjoyed impressive earnings growth of approximately 97% over the past five years. To continue your research on ASVI, click here.

Deere and Company (NYSE: DE), another Zacks #1 Rank (Strong Buy), has seen earnings growth of almost 46% during the last five years. In mid-May, the company reported fiscal second-quarter earnings of $2.43 per share, eclipsing last year’s $1.88 and surpassing the consensus estimate by approximately 14%. The company noted that strong customer response to John Deere products and a continuing focus on operating efficiency are contributing to its performance. To continue your research on DE, click here.

KB Home (NYSE: KBH) recently reported fiscal second-quarter earnings of $2.06 per share, eclipsing last year’s $1.20 and jumping ahead of the consensus estimate by almost 16%. The company said its outstanding second quarter performance underscores the strength of KB Home's geographically diverse operations. It is not surprising that KB, a Zacks #1 Rank (Strong Buy), has managed to generate almost 29% earnings growth during the last five years. To continue your research on KBH, click here.

 
To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=1365.

All the Profit Track strategies were created and backtested using the Research Wizard software from Zacks Investment Research. If you like this screening strategy, but want to narrow down the list of stocks and even improve the performance, then you should start a free trial to the this powerful stock picking tool. Learn more about the Research Wizard and Free Trial offer at: http://at.zacks.com/?id=1993

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Here you`ll discover a Zacks #1 Ranked stock hand selected by Ben Zacks to outperform the market over the next 30 to 90 days. This week`s Timely Buy is…
 

Deere & Co. (DE)

Deere & Company, together with its subsidiaries (collectively, John Deere), manufactures and distributes a line of agricultural equipment, a variety of commercial and consumer equipment and a range of equipment for construction and forestry. Through its financial services segment, the company also finances sales and leases by John Deere dealers of new and used agricultural, commercial and consumer, and construction and forestry equipment.

Deere is intriguing for several reasons. Demand for machinery is surging worldwide as evidenced by the company’s second quarter earnings report. Net income rose to $604 million, or $2.43 per share, up from $477 million, or $1.88 per share, during the same quarter last year. Earnings easily exceeded the $2.13 per share Zacks consensus estimate. The company raised this year’s sales and earnings guidance for this year. Analysts followed suit by raising estimates for current fiscal year and next fiscal year. The company is taking market share in North America and Europe, and the higher than expected revenues occurred despite weaker market conditions in South America and Europe. Once industry conditions improve in those places, Deere stands to benefit even more.

The company’s sales are growing faster than the industry at large, especially in the last few months. Deere’s sales of >100HP 2WD tractors increased in the single-digits, well ahead of the industry’s 7% decline in May. Deere’s sales of 4WD Tractors were up double digits, versus 10% decline for the industry. Deere’s Combine segment sales increased double digits compared with a 6% growth for the industry. At the lower end of the market, Deere outperformed the industry in sales of utility tractors.

Deere’s earnings estimates have been increasing over the past 60 days. Two months ago, they were slated to earn $5.99 per share for this fiscal year. That estimate has increased to $6.36 per share, or a 6.1% rise. The stock is attractively valued at 10.9x 2005 estimates of $6.36 per share. This is below the long-term growth rate of 11.14% that is predicted for the company. The company also pays a 2% dividend yield, with the possibility of future dividend hikes. Downside risk in the stock is contained at such low valuations, especially with estimate revisions going up. Combine these low valuations with the best global agricultural conditions in decades and Deere looks like a solid stock to own at this time.

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With oil lingering around the $60-per-barrel mark, the industry looks as close to a ‘sure thing’ as you’re going to get. But anyone who has been around the block a time or two knows that there’s no such thing. Even though oil is big news and even bigger business, analysts are concerned that a long-awaited correction is right around the corner and could rival the tech implosion a la the turn of the century. Such a concern may be a bit of an exaggeration, especially since a significant slide in prices isn’t likely anytime soon, but the possibility is nonetheless present.

However, the integrated oil industry is still pumping out attractive buying opportunities for investors, who could explore for and produce attractive profits if they keep the larger picture in the back of their minds. The oil & gas international integrated and oil & gas U.S. integrated industries are both in the top ten according to Nick Raich’s “Weekly Earnings and Sector Update.” With Zacks Industry Ranks of 1.94 and 2.17 respectively, they are placed 3rd and 9th out of more than 200 industries.

The performance of the stocks in these groups are a reflection of the outlook for oil and gas prices – and their performances have been solid for the most part. For example, ExxonMobil’s most recent quarterly report contained the highest earnings in history. But the same factor that is buttressing such performance is also bringing some apprehension. But while analysts are concerned about a drop in prices, they also agree that the level is likely to remain high by historical standards, especially since global production will remain just a shade higher than growing demand.

There are, of course, several other factors that impact the space, including production growth, financial returns, and refining and chemicals margins. “After experiencing trough-level refining and marketing margins for most of 2002, margins rebounded nicely in 2003 and remained strong throughout 2004,” according to Sheraz A. Mian, an analyst at Zacks Investment Research. “This has been driven by the almost full-utilization level of domestic refining assets and the impact of ever more stringent environmental standards, coupled with oil and refined product inventories that are still at or below historical levels.” Zacks Investment Research believes that margins will most likely stay at least at mid-cycle levels over the next few quarters.

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PREVIOUS WEEKLY COMMENTARIES….
 

SCREEN OF THE WEEK

'How' to Create Winning Screens

Kevin Matras talks about 'how' he creates his winningest screens. Get five news picks from some of his best strategies. http://at.zacks.com/?id=1410.
 

OTHER TOOLS FROM ZACKS

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At the heart of Zacks Investment Research is the Zacks Rank investment philosophy that continues to vastly outperform the market. Our Zacks #1 Rank (Strong Buy) List has produced the following results for investors:

• +32.8% average annual return since 1988 versus +11.9% for S&P 500
• Outperformed S&P 500 in 16 of the last 17 years
• +43.8% total return from 2000 to 2002 – the worst bear market in over 60 years.
• +74.7% in 2003 and +28.8% in 2004

And just as importantly, our #5 Ranked stocks (Strong Sells) have alerted investors as to which stocks to dump from their portfolios to avoid unnecessary losses.

To truly take advantage of the Zacks Rank, you need to first understand how it works. That's why we created the free special report; Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions. Download a free copy now to prosper in the years to come, by visiting: http://at.zacks.com/?id=1424.

Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=1423.

FREE PORTFOLIO TRACKER

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• Broker Recommendation changes
• Earning Estimate revisions
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We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week.

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Editor-in-Chief
Zacks Profit from the Pros

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