Tuesday - February 7, 2006
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2372. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH The ratio of profit surprises to misses remained steady last week at 2.4:1. As of last Friday, 1454 companies within the Zacks Rank universe have reported fourth-quarter results. Revenues, in aggregate, have also been bullish, though by a more modest margin of 1.5:1. The trend in earnings estimate revisions continues to be unimpressive. Analysts have increased forecasts for 2006 full-year profits on 637 companies and lowered forecasts on 625 companies. The average change in 2006 earnings estimates was 0.3%. Energy companies have begun to report en masse and the numbers are roughly inline with most other sectors. Positive profit surprises outnumbered misses by a margin of 2.1:1. Estimates for 2006 were revised upwards on 31 companies and were revised downwards on 24 companies; the average revision was +2.6%. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Royal Dutch Shell (RDS/A) was a high-profile miss last week. Fourth-quarter profits totaled $1.86 versus expectations for $1.90 per share. The company said that earnings were adversely impact by plant shutdowns following Hurricane Katrina. A sizeable portion of the misses came not from the oil conglomerates, however, but rather the Oil & Gas Producer/Pipeline group. Seven of the 11 producer/pipeline companies that have reported so far have missed expectations; however, much like the Transportation-Truck industry group that I discussed last week, the quality of the earnings is largely related to company-specific issues. For instance, Valero L.P. (VLI) blamed higher-than-anticipated costs associated with its sale of assets to Pacific Energy Partners, LP (PPX), the turnaround of Valero Energy’s (VLO) McKee refinery and maintenance for the disappointing results. Conversely, the refiners have issuing good results. Sunoco (SUN) and Valero Energy said margins were strong. Bill Kleese, CEO of Valero Energy, predicted that “2006 will be the best year for the refining industry”. Propane marketers, AmeriGas Partners (APU) and Suburban Propane Partners (SPH) also exceeded expectations, despite warmer weather and customer conservation. Analysts have revised forecasts for 2006 earnings upward for all four companies. Shifting to another part of the economy, concrete companies have been delivering solid results. Eagle Materials (EXP), Florida Rock Industries (FRK) and Vulcan Materials (VMC) all topped fourth-quarter expectations. The three companies are enjoying pricing power and this, in turn, has resulted in upwardly-revised forecasts for 2006 profits. Investors interested in the construction sector may also want to note paint company Sherwin-Williams’ (SHW) numbers. SHW exceeded fourth-quarter expectations by five cents and provided 2006 guidance that was above analysts’ forecasts. The only other paint company to have reported recently was RPM International (RPM), which met fiscal second-quarter expectations. Read the complete Industry Outlook at: http://at.zacks.com/?id=2379. Charles Rotblut, CFA, is a senior market analyst for Zacks.com. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. To see their latest posts, click here. Amgen, Inc. (AMGN) - Very Attractive Valuation. For full Zacks research report, click here. Pogo Producing (PPP) - Lack of Organic Products. For full Zacks research report, click here. Positive Surprises in EuroTech Positive Surprises Continue to Lead Disappointments by 3:1 Margin
2. 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... Profit Tracks: Earnings and Margins This Profit Track goes to the heart of fundamental investing by finding companies with healthy earnings. The main ingredients are the search for Earnings Growth and Net Profit Margins. Then for good measure we make sure earnings estimates are moving higher which is a strong indicator of future performance and that brokerage firms are positively rating the stock. Earnings are the single most important metric for a company. Combine that with a healthy Net Profit Margin and you find a screen that has generated a cumulative return of +425% since January 2001. During 2005, this screen continued its winning ways with a +22.3% return. American Financial Group, Inc. (AFG) announced in mid-December an increase in its 2006 earnings guidance to between $3.80 and $4.15 per share from $3.70 and $4.00 per share. In late October, AFG delivered third-quarter earnings per share that were ahead of analysts' expectations by 26% and topped the prior year's result. The company will report financial results for the fourth quarter next week. AFG has a net margin of .10 and produced annual earnings growth of nearly 30% above the previous year. Continue your research on AFG at: http://at.zacks.com/?id=2389. AAR Corp. (AIR) generated impressive earnings growth of 400% last year over the previous year, which is currently the highest increase in annual earnings growth on this Profit Track. This Zacks #1 Rank (Strong Buy) company is a worldwide leader in supplying aftermarket products and services to the global aerospace/aviation industry. In late December, AIR posted fiscal second-quarter earnings of 22 cents per share, exceeding the consensus estimate by almost 5%. Continue your research on AIR at: http://at.zacks.com/?id=2390. Omega Healthcare, Inc. (OHI) recently issued its fourth-quarter report, noting that earnings surpassed last year’s result for the fourth quarter. The company is a self-administered real estate investment trust, which invests in income-producing health care facilities. OHI experienced earnings growth of 268% for the most recently-completed year versus the prior year. This puts the company in second place for the highest increase in annual earnings growth on the current Profit Track. Omega Healthcare offers a net margin of .35. Continue your research on OHI at: http://at.zacks.com/?id=2391. Thomas Nelson, Inc. (TNM), a publishing company, delivered annual earnings growth of 20% above the prior year. Thomas Nelson will release fiscal third-quarter results later this week. In early November, TNM announced fiscal second-quarter earnings that outpaced the consensus estimate by almost 10% and improved on the previous year’s performance. Continue your research on TNM at: http://at.zacks.com/?id=2392. To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=2393. 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 this powerful stock picking tool. Learn more about the Research Wizard free trial offer and our new special report “Top 10 Stock Screening Strategies” at: http://at.zacks.com/?id=2394 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Three Days Up: Price and Volume Kevin Matras looks at increasing P/E Ratios for spotting potential price and earnings trends: http://at.zacks.com/?id=2395. 3. OPTIONS CENTER Zacks has partnered with the leading options experts, Schaeffer's Investment Research, to provide you the best options commentary, research, and trading tools on the market today. As we mentioned back in early January, one of Bernie’s major themes for 2006 is that as long as the market holds up, small-caps will continue to outperform large-caps. This of course runs completely opposite to what we hear all over the TV and in most of the major financial newspapers. The overwhelming consensus is that large-caps are due to bounce back and this is the year that it’ll happen. In fact, small-caps (and energy and gold for that matter) are simply too risky. Well, Bernie takes a different approach and says that if you want to beat the market, you need to invest in these “risky” assets. So how has he done so far you ask? For the month of January the small cap Russell 2000 (IWM) was up 8.44%, while the Dow was up less than 2%. Not bad, huh? But the fun doesn’t stop there, as the AMEX Gold Bugs Index (HUI) was up a massive 28% and the Oil Service HLDRs Trust (OIH) tacked on another 20%. So those “risky” assets aren’t doing so badly now are they? Yes, it’s early in the year, but as long as the theme of large-caps over small-caps and “risky” assets prevails, I think this trade should continue to work. Today we want to take a look back at that observation in early January that described what it was that Bernie was looking at and what we saw from the Unusually High Option Volume filter that lead us to suggesting playing a May 68 call (DIW EQ) for $3.70 a contract. Before we get into that, let’s talk a little bit about that May call shall we? As of Wednesday’s close, you could have sold that option for a nice little gain of 56%. Not too bad for less than a month’s worth of holding we’d say. One thing that we really haven’t touched on much is the idea of taking profits. Anytime you get a trade to go in your direction right off the bat, it’s usually a good idea to lock in some profits. So in this case, we’d recommend taking some money off the table and back into your pocket. After all, there’s an old saying that goes something like this, “No one ever went broke taking profits.” Now here you go, exactly what I said in early January about small-caps. This week I want to take a look at the Unusually High Option Volume filter. I haven't looked at this filter for a while, and I think now is as good a time as any to take a look and see what we find. The nice thing about this filter is that you can look at both the most active calls and puts from the previous day's action. What can you garner from this, you might ask? Well, to answer that question, let's take a step back to describe our Expectational Analysis approach to trading here at Schaeffer's. In short, we are contrarians. The simplest way to put this is that we look for stocks that are trending higher amid a sea of skepticism. We view this as a sign that money is left on the sidelines just waiting to come in and push the shares higher. Obviously, bearish plays are vice-versa - optimism toward an underperformer. If you've read this series during the past few months, then you know that in October I was looking for a tradable bottom that would last the remainder of the year. Fortunately, this approach worked out nicely, and the filters found some nice bullish plays as a result. Currently, I'm beginning to think that at some point during the next few months we're going to have a pretty decent pullback. For that reason, I'm considerably more neutral on the overall market. On Friday, Bernie was quoted in a very interesting article in The Wall Street Journal that focused on small-caps versus large-caps. According to the article, "The latest Russell Investment Group survey of 112 U.S. money managers found 80% touting large-cap growth stocks above all else, the highest percentage of favoritism shown to any one asset class in the two-year history of the survey." The only problem is that the Dow Jones Industrial Average (DJIA) finished last year flat, while small-caps and mid caps rose to record highs. So, we have an underperforming sector (large-caps) getting lots of love, while an under-loved sector (small/mid cap) still isn't getting recognition. This is exactly what we want to see from our contrarian perspective. Here's what Bernie had to say in that article, "Such smothering chumminess gives most contrarian investors the heebie-jeebies. Not only was the same consensus forecast dead wrong last year -- major, large-cap indexes were little changed, while the small-cap Russell 2000 [IWM] and S&P 600 both rose to record highs -- but the fact that it still holds sway means too much money is already riding on large-caps and there may not be enough left to push them higher." Interesting stuff, huh? Now, back to the list. As you might have guessed from all the above - IWM made the list on Thursday thanks to more than 11,000 put contracts trading at the February 68 strike. The only tickers that had more volume were the usual biggies like the Nasdaq 1000 Trust (QQQQ) and the S&P 500 Index (SPX). So, we know that the majority of the "experts" are telling us to switch out of small-caps and into large-caps, because small-caps are due to correct and that large-caps are undervalued. But what about the other areas of sentiment that we track? One area that we like to look at is what the short-term option traders are doing. This can best be seen by looking at the Schaeffer's put/call open interest ratio (SOIR). The SOIR is simply the number of puts divided by the number of calls among near-term options. From our contrarian-based approach, we love to see a huge number of puts levied against a strong-performing stock. If a stock can advance amid heavy bearish sentiment, there is evidence that plenty of money remains on the sidelines to help push the stock higher once that crowd begins to turn bullish. Turning back to IWM, on Friday the index sported a SOIR of 2.33 - which was higher than 68% of the readings taken during the past year. Furthermore, IWM has trended higher recently, suggesting that the crowd is actually getting more bearish. This development is exactly what we want to see, as this crowd is usually wrong. Digging further in to the options scene, I see that there is a huge amount of put open interest below IWM's current level of 68. Without getting too technical here, we use these high levels of put open interest at a strike below the current price as potential support. It has to do with the market makers and the way they are hedged. We'll just leave it at that, as the bottom line is that ample put open interest can serve as support. Add it all up, and IWM sports a Schaeffer's Equity Scorecard rating of 7.0 out of 10.0 - suggesting there could still be room to run for small-caps. After looking at the Unusually High Option Volume filter, and doing a few minutes of research on SchaeffersResearch.com, we have a potentially very nice-looking long play. For fun, why don't we say we paper traded the IWM May 68 call (DIW EQ) for $3.70 - where it was trading on Friday afternoon. Write this one down and see how it does, but given the media sentiment and quantitative backdrop, this one could be a nice contrarian play. So there you go, exactly what we said back then. With all of that said, we’ll be back next week and take a look at a different filter and we’ll see if we can find another winner. In the meantime, keep on using all of the filters on these pages and don’t be afraid to paper trade and find out what works best for you. To learn more about the Unusually High Option Volume filter, click here. Discover all the tools and commentary available from the Zacks.com Options Center at: http://at.zacks.com/?id=2382. 4. ZACKS RANK BUY STOCKS Every day on Zacks.com we highlight four Zacks Rank Buy stocks. Each individual stock is chosen based on how well they match the criteria for the four main schools of investing: Aggressive Growth, Momentum, Growth & Income and Value. Aggressive Growth – Rackable Systems, Inc. (RACK) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum – Planar Systems (PLNR) Planar Systems (PLNR) management is working hard to reduce costs. The market is paying attention. PLNR has been on a tear ever since the company raised its fiscal first quarter earnings forecast on Jan 10, 2006, citing unexpectedly strong sales. Read the full analysis on PLNR at: http://at.zacks.com/?id=2496. With earnings per share growing 54.5% over the past five years, coupled with a low price-to-book multiple, Deckers Outdoor Corporation (DECK) was one of four Value Zacks Rank Buy Stocks featured last week. Read the full analysis on DECK at : http://at.zacks.com/?id=2497.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Zacks Rank #1 and #5 Additions Zacks #1 Rank List: 59 New Additions (alpha by ticker)
To see the full list of Zacks #1 Ranked stocks (approximately 220 stocks), then click here. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Zacks #5 Rank List: 64 New Additions (alpha by ticker)
To see the full list of Zacks #5 Ranked stocks (approximately 220 stocks), then click here. 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 stocks (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=2385. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=2383. 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 and improve your portfolio's performance. Did we mention it's free? Get started now by going to: http://at.zacks.com/?id=2386. We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week. REFER-A-FRIEND If you enjoy this e-mail newsletter, then please pass it along to a friend. Simply forward them the link below to sign up for their own free subscription. If you're reading a forwarded copy, sign up for your own, so you get this wealth of information every week. Just click here. THANKS! 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 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. To contact us by mail: Zacks Investment Research To unsubscribe from receiving "Profit from the Pros" e-mail newsletter, click here. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Zacks #1 Stocks on the Move 05/23/2013
| Company Name | Symbol | %Change |
|---|---|---|
| WESTELL TECH | WSTL | 8.72% |
| ALLIANCE FIB | AFOP | 5.00% |
| MAXWELL TECH | MXWL | 3.64% |
| STEIN MART I | SMRT | 3.50% |
| CONN'S INC | CONN | 3.29% |
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