Wednesday - October 19, 2005
Want to view the archive of past issues? Go to: http://at.zacks.com/?id=62.
1. FEATURED EXPERTS
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.
Twenty-nine years ago Jim Oberweis and his team began publishing a model portfolio with a stated objective of outperforming the Dow Jones Industrial Average (DJIA) by an absolute 10 percentage points per year. They met that objective in 18 of the 28 years. So far in 2005, Oberweis and his team are on track for another successful year, with a +12.9% lead over the DJIA through Sept. 30. Of course, the number that really counts is the long-term average return. Over longer periods of time, Oberweis and his team’s Model Theoretical Portfolio has substantially exceeded their expectations with a compound rate of return of 24.4% compared to 8.4% for the DJIA, 8.8% for the S&P 500 Index (excluding dividends), and 11.5% for the NASDAQ Composite. Oberweis and his team’s growth rate excludes transactions costs and dividends and is for a theoretical portfolio using closing prices on the last Friday of each month.
Oberweis and his team believe that much of their success over the last 30 years was achieved by looking in areas where others are not. Historically, they have sought out smaller companies in the U.S. which do not tend to attract as much institutional attention. Oberweis and his team believe that the next 30 years may require a shift in this approach, as they believe other countries such as China currently offer even better growth opportunities and wider market inefficiencies than the U.S. Accordingly, Oberweis and his team are planning to devote resources in the years to come toward applying their same philosophy in other areas with the opportunity to discover hidden values. Their research office in Hong Kong represents a commitment toward unlocking and discovering value in China. Through their U.S. team and their new China team, Oberweis and his team believe their opportunity to find exceptional investment ideas will be even better than it ever has been.
The lesson from their long-term record is that, although year-by-year results can be volatile, disciplined investors who remain fully invested in a portfolio of high-growth equities selected using Oberweis and his team’s methodology have historically achieved exceptional average rates of return over long periods of time.
More. . .
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Bronco Drilling Company (NASDAQ: BRNC) provides contract land drilling services to oil and natural gas exploration and production companies. Recently, the company announced that it intends to acquire two privately-held drilling companies for total consideration of about $118 million. Following the closing of these deals (which are expected to close in the fourth quarter), Bronco will end 2005 with a total rig fleet of 35 operating rigs and 27 additional rigs in inventory slated for refurbishment. Bronco has two refurbishment yards and expects to refurbish at least 10 rigs in 2006. Additionally, the company is seeing “day-rates” (the rates charged to its customers on a daily basis for drilling services) increase. The company operates its rigs in Oklahoma, and following the acquisitions, in Texas. In the company’s six months ended June 30, 2005, sales increased approximately 161% to $20.2 million from $7.8 million in the same period of 2004. Bronco Drilling reported net income of $3.3 million in the six months ended June 30, 2005 versus a loss in the same period of 2004. Bronco completed its initial public offering (IPO) of 5.865 million shares on August 16, 2005 at $17 per share.
Peerless Systems Corporation (NASDAQ: PRLS) is a provider of imaging and networking technologies and components to the digital document markets, including manufacturers of color, monochrome and multifunction office products and digital appliances. Peerless offers a broad line of scalable software and silicon offerings enabling their customers to shorten their time-to-market and reduce costs by offering unique solutions for multiple products. Customers include Kyocera-Mita, Canon, IBM, Konica Minolta, Xerox and Lenovo. In the company’s latest reported second quarter ended July 31, revenue increased approximately 53% to $9.7 million from $6.3 million in last year’s second quarter and also grew 34% sequentially. Peerless reported earnings per share of $.06 in the latest reported second quarter versus a loss in last year’s second quarter. The company also provided guidance for a strong third quarter and full year revenue growth of nearly 50% over the prior year.
The Oberweis Report is a proprietary investment advisory letter specializing in stocks of extraordinarily rapidly growing companies. Each issue contains new stock recommendations along with a review of those previously recommended stocks that have yet to be sold. To learn more about this newsletter and free trial offer, click here.
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Paul Tracy explains that while the major averages remain sluggish, certain stocks continue to perform well. Read about two of them. More...
Charles Norton and Allen Gillespie warn that the market is under distribution and caution is warranted. More...
d) Take Note
Richard Moroney updates investors on recent developments. Learn about a tech stock, a medical company, and an airline name. More...
Dennis Slothower says investors should let the market prove itself before making any major commitments. 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=1386.
2. SCREEN OF THE WEEK
Zacks.com offers three unique weekly commentaries that all
further our mission to help you Profit from the Pros. Today is
the latest installment of Screen of the Week from Kevin Matras.
Each week, Kevin shares with you another winning screen he has
discovered using the Research Wizard software from Zacks
Investment Research. Learn more about the Research Wizard at: http://at.zacks.com/?id=1388.
I’ve published this screen several times over the last couple of years and it’s one of my favorite screens to trade. It’s a price momentum screen that finds stocks on the move. But with a Price to Sales ratio added to it, these movers are still considered ‘bargains’.
The parameters are:
The results:In 2001, (using a 4-week rebalancing period) the average annualized gross return was 128.9% with an average win ratio (winning periods) of 64%. In 2002, the average annualized gross return was over 262.1% with an average win ratio of 70%. In 2003, the average annualized gross return was over 269.7% with an average win ratio of 77%. (WOW!) In 2004, the average annualized gross return was 48.4% with a 65% win ratio. And so far in 2005 (YTD -- thru 9/30/05), the average cumulative gross returns are 34.3% with a 66% win ratio. Aside from the big returns, one of the main benefits of this screen is that it generates the same number of qualified stocks each period (three). This week’s three picks are (for the week of 10/17/05):
(Even though I originally designed this screen to be rebalanced every 4 weeks, it also tests well on a one-week basis too.) This screen ‘Big Money’ can be found in the Research Wizard by going to:
‘Screen’ on your Menu Bar
Use this screening strategy as it is or try and improve upon it yourself. Either way, incorporating some or all of these ideas could dramatically super-charge your portfolio.
And remember, the key to successful screening and trading is in discovering those screens that have produced profitable results in the past. And that’s exactly what you get with the powerful Backtesting ability of the Research Wizard. Sign up now for a free two week trial. http://at.zacks.com/?id=1388.
Discover all the Free Screening Tools on Zacks.com at: http://at.zacks.com/?id=1389.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
3. BEST OF ZACKS EQUITY RESEARCH
BULL OF THE DAY
Komag, Inc. (KOMG) – Excellent Entry Point.
Tweeter Home Entertainment (TWTR) - Tough Retail Market.
Prepare for Medicare's Biggest Change
Industry Rank for the Week of October 17
Earnings Season is Here!
4. PROFIT TRACKS
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...
This strategy uses the PEG Ratio to find attractively priced stocks poised for price appreciation. The PEG Ratio is simply the P/E (Price divided by Earnings) of a stock divided by its 5-year projected growth rate. Too often investors think of value investing being the antithesis of growth investing. The beauty of using PEG is that you can find value stocks even amongst hot growth stocks.
If you like to use a company's PE ratio to determine its value, you'll love using the PEG ratio. Find out which companies offer the greatest value regardless of growth rate to enjoy stellar returns. Using this indicator in a stock screening strategy can produce stellar profits, such as a +38.9% return in 2004 and continued strong returns in 2005.
Atwood Oceanics, Inc. (NYSE: ATW) is a Zacks #1 Rank (Strong Buy) company that has a PEG ratio of .28, which suggests the stock is trading at a significant discount. In late July, the Houston-based international drilling contractor posted fiscal third-quarter earnings of 38 cents per share. The result was ahead of the consensus estimate by nearly 9%. To continue your research on ATW, click here.
Nabors Industries Ltd (AMEX: NBR) satisfies this profit track criteria with a PEG ratio of .52. In late July, the company reported second-quarter earnings of 84 cents per share, exceeding the consensus estimate by almost 17% and improving on last year’s 30 cents. The company noted that the outlook for its business has never been stronger, with rig demand showing no signs of abating in both North America and internationally. Results for the third quarter will be released next week. To continue your research on NBR, click here.
Orleans Homebuilders, Inc. (AMEX: OHB) will announce fiscal first-quarter earnings next week. In mid-August, the residential homebuilder released fiscal fourth-quarter earnings of $1.51 per share, outperforming the previous year’s 82 cents and surpassing the consensus estimate by almost 9%. With a PEG ratio of .46, value investors may find OHB to be an attractive investment. To continue your research on OHB, click here.
Unit Corporation (NYSE: UNT) is another Zacks #1 Rank (Strong Buy) company and has a PEG ratio of .42. In late July, the company announced second-quarter earnings of 86 cents per share versus last year’s 44 cents. The result topped the consensus estimate by almost 18%. The company stated that favorable commodity prices and industry conditions are producing great results and more growth opportunities. Third-quarter results will be available next week. To continue your research on UNT, click here.
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
5. ZACKS TOOLBOX
Zacks.com is first and foremost a free resource to help you make more profitable stock picks. In this space each week, we will provide insights into various tools and data points provided on Zacks.com and how to use them to improve your portfolio's performance.
Have you ever wanted to test out a new investing strategy without actually putting your own money at risk? Would you like to see how good an investor you are compared to others? Do you think if given the chance you could prove to your friends that you really are the better investor? How would you like the opportunity to manage a $100,000 portfolio?
If the answers to any of these questions is yes, or if you simply would like a tool to help you learn how to invest, then you'll love the latest addition to Zacks.com - the Simulator. http://at.zacks.com/?id=1987.
Manage a $100,000 Portfolio
Simulator gives you the opportunity to manage a $100,000 portfolio. You simply enter buy and sell orders; Simulator does the rest. It keeps tracks of all your transactions, calculates your performance throughout the trading day, and ranks your returns against other investors.
Simulator acts just like a real online brokerage. You can buy and sell stocks. You can place market, limit, buy stop, and sell stop orders. You can even short a stock. If you like, you can even request to have trade confirmations emailed to you. And just like with your broker, you'll be charged commissions on each trade and paid interest on your cash balances.
Simulator automatically tracks your performance. On a single, easy-to-read page, you'll be able to see all the stocks in your portfolio, the price you paid for each stock, the current trading price, and both the percentage and dollar amount gain or loss on each investment. It's just like having your own $100,000 brokerage account.
The great thing about Simulator is that it makes "paper-trading" very easy. You can test out a new investing strategy without risking any of your own money. If the strategy doesn't work, you haven't lost a dime. Better yet, since you can create multiple portfolios, you can test multiple strategies at the same time. And if you find a strategy that really works, Simulator gives you the chance to show off your stock picking skills.
Compete Against Others
In addition to replicating an online brokerage account, Simulator allows you to track your performance against others. Simulator tracks the performance of every portfolio and ranks them accordingly. Pick the right stocks and everyone will know you're the best.
You can choose from a variety of games including Zacks (the largest game), Growth Stocks, Value Stocks, Day Trade, and Aggressive. Just click on the "Join a Game" link in Simulator and you'll immediately be able to start trading stocks.
You can also challenge your friends to test their investing skills. Simulator allows you to create an invitation-only private game. When you create your own game, you specify the initial balance of the account (options range from $1,000-$1 million), whether margin can be used, whether short-selling is allowed, and even whether U.S. or Canadian dollars should be used.
Simulator is Free
Simulator is completely free. There is absolutely no charge to join an existing game or set-up your own game. Try Simulator today by going to http://at.zacks.com/?id=1987.
OTHER TOOLS FROM ZACKS
At the heart of Zacks Investment Research is the Zacks Rank investment philosophy that continues to vastly outperform the market. Our Zacks #1 Ranked (Strong Buys) have produced the following results for investors:
And just as importantly, the Zacks #5 Rank (Strong Sell) List has 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=75.
Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=72.
FREE PORTFOLIO TRACKER
Do you believe that these events affect stock prices?
If you answered yes, then how are you staying on top of these changes for your stocks? If you are one of the 45,000 investors who wake up every morning to the Daily Portfolio Updates emails from Zacks.com, then you are all set. If not, then sign up now to get this vital information sent to you daily to help take definitive action to improve your portfolio's performance. Did we mention it's free? Get started now!
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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Regards and Happy Investing,
Charles Rotblut, CFA
p.s. What is the mission for Zacks Profit from the Pros? Click here to find out how we will help you become a more successful investor.
The Zacks Performance Rank performance is the total return of equal weighted simulated portfolios consisting of those stocks with the indicated Zacks Rank net of fees. Results reflect the reinvestment of dividends and other earnings. Simulated results do not represent actual trading and may not reflect the impact that economic and market factors might have had on decision-making if an adviser were actually managing a client's money.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
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