Thursday - August 17, 2006

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Zacks #1 Ranked stocks average a 32.4% annual return. Every day on Zacks.com we highlight four new 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 – II-VI Incorporated (IIVI)

II-VI Incorporated (IIVI) reported a strong fiscal-fourth quarter and guided higher. The company has met or exceeded analyst expectations in 13 out of the previous 14 quarters. All three analysts covering the stock have raised their estimates for this fiscal year. Over the past month, this year's estimates have risen 9.5% to $1.15 per share. Read the full analysis on IIVI at: http://at.zacks.com/?id=3106.

 
Growth & Income – The McGraw-Hill Companies, Inc. (MHP)

The McGraw-Hill Companies, Inc. (MHP) met or exceeded the Street’s earnings estimate for 16 consecutive quarters. After posting solid financial results for the first half of 2006, the company boosted its earnings per share outlook for the remainder of the year. MHP has a current dividend yield of 1.3% and a five-year average dividend yield of 1.6%. The company’s return on equity tops that of the industry average—34% compared to 26%. Read the full analysis on MHP at: http://at.zacks.com/?id=3108.

More...

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Zacks Rank continued...

Momentum – Deckers Outdoor (DECK)

Deckers Outdoor (DECK) announced a whopping 250% positive earnings surprise on Jul 27, the company’s 14th positive earnings surprise in the last 15 quarters. DECK reported EPS of 21 cents, equal to the same quarter last year, but sharply above analysts’ consensus estimates of six cents. Read the analysis of DECK at: http://at.zacks.com/?id=3109.

 
Value – Bronco Drilling Company, Inc. (BRNC)

On Aug 9, Bronco Drilling Company, Inc. (BRNC), a Zacks #1 Rank stock, exceeded analysts’ earnings expectations for the past four quarters by an average margin of 16.3%. The company recently reported record revenues for the second quarter. Earnings per share are forecasted to grow a robust 55% over the next 3-5 years. BRNC has a price-to-book ratio of 1.6 and a PEG ratio of 0.14. Read the full analysis on BRNC at: http://at.zacks.com/?id=3110.

 
Zacks Rank Resources

• Zacks Rank Home Page: Go to http://at.zacks.com/?id=3104.
   
• Free Zacks Rank Guide: Learn how to profit from Zacks Rank and its 32.4% annual return. Get the guide: http://at.zacks.com/?id=2549.
   
• Zacks Premium: Full Access to the Zacks Rank stock, plus much more. Read on at http://at.zacks.com/?id=3105.
   
• Zacks Advisor: Discover Ben Zacks' hand picked #1 Rank stocks on his Timely Buys list at: http://at.zacks.com/?id=2550.
   
• Zacks Options Trader: Combine the timeliness of Zacks #1 Rank stocks with the explosive profit potential of options. Learn more at: http://at.zacks.com/?id=2689.
   
• Zacks Wealth Management: Own all the Zacks #1 Ranked stocks in a portfolio managed by Zacks. Learn more at: http://at.zacks.com/?id=2551.

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Zacks.com features a free investment simulator where our customers can prove their stock picking skills to the rest of the world. In these articles we will share with you the insights and recommendations from Top Simulator Players. Learn more about the current Zacks Challenge at: http://at.zacks.com/?id=2514.
 

Jerry Tucker

Zacks was fortunate enough to interview Jerry W. Tucker (aka: Jerry Tucker), a Simulator top player who also happens to work in the financial industry. A Licensed Securities Principal by trade, this Third Quarter Stock Challenge contestant has enjoyed his ride toward the top with a current overall portfolio return that stands at roughly 15%.

Eager to the pick the brain of this financial services professional, who has spent 30 years in the industry, we began by asking about his strategy. “I mostly buy big name companies that trade within a range and also show some volatility,” answered Jerry. The Simulator player went on to explain that, as he tells his clients, the only guarantee is that stocks will go up and down. Therefore, this market watcher simply strives to achieve good timing in the trading of large stocks for both the entry and the exit.

Some of the stocks that he is currently holding include Tronox, Inc. (TRX), National Semiconductor Corp. (NSM) and Nike, Inc. (NKE). Jerry also has a short position on Exxon Mobil Corporation (XOM). Click here to check out this player’s current portfolio: http://at.zacks.com/?id=2515.

What is his secret for success?

The savvy investor explained that in addition to seeking the right timing, he buys stocks that have a substantial following. National Semiconductor Corp. (NSM), Wal-Mart Stores, Inc. (WMT) and Motorola (MOT) were used recently in this strategy. Jerry also looks for companies that have taken a real dive and are now potential buy-outs by larger companies. He commented, “I now own Pixelworks (PXLW), buying in after a terrible down movement last year. This company was in the top group of fastest-growing companies in February 2005, but now is a buy-out candidate under $3.00 per share.”

This Simulator contender finds his securities with the help of research tools, such as Zacks, msn.com, Smart Money, The Week, www.bigcharts.com and www.stockcharts.com. “I also use QuoteTracker software and subscribe to DTN - IQ feed for instant stock quotes that also show real-time bid and ask amounts,” stated Jerry.

What does he like and why?

“I purchased the Nasdaq 100 (QQQQ) ETF series when the charts simply indicated that the down movement might be at or close to a bottom, and sure enough, got a rebound of 10-15% in a short time. I purchased a stock called Frontline (FRO), that transports crude oil by ship, right when the news hit that the Prudhoe Bay pipeline might be shut down for some time. Other people also thought that news should promote more shipping of oil around the globe, so FRO made a good run to the upside,” said Jerry. He added that after the FRO’s increase, he sold the stock.

When is it time to sell?

The market enthusiast replied, “I like gains and I will take them on a run up because of the normal ebb and flow of the marketplace. Sell a non-performing position and start over. There are always going to be other buying opportunities.”

What does the future hold?

The astute trader said he predicted in January 2006 that the Dow would reach at least 11,500 this year. The index crossed that mark and Jerry expects that it will return to that level before year-end.

He also pointed out that 4% - 6% inflation is a good range for stock performance, historically.

Then the seasoned investor explained that domestic large stock price increases usually follow periods of high performance in international stocks. Jerry added that the last two-and-a-half years have seen international stocks deliver the highest percentage increases in value.

Any advice for the newbies out there?

The securities principal said, “examine historical trends and patterns to get the big picture, such as looking at how politics, the cpi, federal reserve interest rate adjustments have affected the markets, and then go into more detailed examination of individual stocks.

 
Stock Challenge from Zacks- Do You Have What it Takes?

It’s free. Its fun. It's the place to show your investing prowess. The best stock pickers will be rewarded with thousands of dollars in prizes. Learn more at: http://at.zacks.com/?id=2671.

Trade Options? Then sign up for the Zacks Options Challenge at: http://at.zacks.com/?id=2672.

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With market volatility expected to continue and investors growing increasingly more concerned about many issues related to the general markets, senior analyst David Weissman, CFA says there are several opportunities to find good telecom stocks with attractive valuations and solid dividend yields within his coverage. We spoke with him recently for his perspective.

David, we wanted to discuss with you today the recent economic climate, not to mention the horrific geo-political events and its impact on the telecom investments. What is your overall view at this point?

The culmination of conflicts in the Middle East, North Korea and other areas of the world are having devastating effects on economic markets, regardless of whether the investment is technology and telecom related, seasonal or cyclical, small-cap or large-cap. It is important for investors to maintain a long-term investment horizon, diversify in multiple asset types – stock, bonds, cash and tangible assets – and look for solid companies that survive turbulent times like these.

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Zacks Equity Research continued...

Has your overall neutral view on the telecom industry become more negative because of war and other events over the past month?

If you look at it from a shorter time horizon, the answer is yes. But, because I also believe that telecommunications is a utility – like electricity, water and other necessities – and the long-term prospects remain intriguing for investors with patience.

What can you recommend for investors still interested in maintaining an investment allocation in the telecom industry?

During these turbulent market times that may be exacerbated by higher interest rates and continued expectations of inflation, the impact is often more severe in higher-risk telecom and technology equity sectors. If investors are considering an allocation in telecom, it is worth identifying established companies with significant balance sheet strength, strong cash positions, limited debt, and with the ability to effectively improve their business prospects. I look for companies that are offering attractive dividend yields and companies that are large and stable to weather the volatility.

Can you give us some examples of respectable dividend-paying telecom companies?

Sure. It is rare to find a telecom equipment company paying a dividend. However, most telecom services companies offer some sort of payout to their investors. In that regard, I have identified Embarq (EQ) as offering one of the more attractive dividends in the United States services sector, yielding approximately 5%. Verizon (VZ) is not far behind in terms of a dividend payout, and I believe Verizon would be a more suitable investment as their business is more stable and the company has been around much longer than newly formed EQ, which was the recent spin-off of Sprint's local telephone business.

Probably a worthwhile strategy is to couple dividend-paying companies with diversification in foreign countries. Bell Canada (BCE) is also offering an attractive dividend at approximately 4.5% when we last checked.

To read the complete Analysts Interview, click http://at.zacks.com/?id=2693.

David Weissman, CFA is a senior analyst covering the telecommunications industry for Zacks Equity Research.

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MORE FROM ZACKS EQUITY RESEARCH...
 

Analyst Blog

Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Evergreen Solar (ESLR), Ciphergen (CIPH), Fuel-Tech, N.V. (FTEK) and Hess Corporation (HES). To see their latest posts, click here.

Rudolph Technologies (RTEC) - Good Acquisition. For full Zacks research report, click here.

 
BEAR OF THE DAY

Landry's Restaurants (LNY) - Costs Increasing. For full Zacks research report, click here.

 
EARNINGS TRENDS

Earnings Data: No Recession Soon

With double-digit earnings growth expected to continue, it is unlikely that we are about to go into a recession. More...

 
ZACKS INDUSTRY RANK

The Week of August 15

Earnings estimates for several airlines are unchanged following the Thursday’s foiled terrorist plot. More...

 
Rating Upgrades - NEW! 

Find out which stocks have been recently upgraded by Zacks Equity Research: click here.

 
Zacks Equity Research Buys - NEW! 

Read the reports on all of the stocks on the Zacks Equity Research Buy List: click here.
 

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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: Recent Price Strength

This screen looks for stocks trading in the upper range of their 52-week highs along with attractive Zacks Rank and Broker Ratings. This strategy proves that the "trend is your friend" with a +35.5% return versus +4.9% for the S&P 500 in 2005.

 
Here are four stocks that make the grade for the Recent Price Strength Profit Track:

Anixter International Inc. (AXE), a Zacks #1 Rank (Strong Buy) company, recently posted second-quarter earnings of $1.15 per share. The result eclipsed the consensus estimate by about 40% and surpassed the previous year's 61 cents. The company stated that growth was particularly strong in the electrical and electronic wire & cable market due to strong end-market customer demand, global expansion of the markets served and higher copper prices. AXE has increased by approximately 23% over the past four weeks. The shares are trading very close to a 52-week high. Continue your research on AXE at: http://at.zacks.com/?id=2354.

Corrections Corp. of America (CXW) has break out potential as it is currently trading near its 52-week high. The company recently approved a 3-for-2 stock split and announced results for the second quarter. Earnings per share were 63 cents, which topped the consensus estimate by almost 11% and outperformed the year-prior total of 37 cents. CXW has seen share price appreciation of about 14% over the past four weeks. Continue your research on CXW at: http://at.zacks.com/?id=2355.

Genesis Energy LP (GEL), another Zacks #1 Rank (Strong Buy) company, has been trading right at or near its 52-week high. The share price has increased by about 22% over the past four weeks. The company recently released second-quarter earnings of 24 cents per share, tripling last year’s eight cents and exceeding the consensus estimate by 200%. Genesis Energy mentioned that all segments reported improved performance from the prior year period. Continue your research on GEL at: http://at.zacks.com/?id=2356.

Sun Healthcare Group Inc. (SUNH) reported second-quarter financial results earlier this month. The company said its 2006 initiatives focusing on improving consolidated margins, profitability and cash flow are producing results as evidenced by both the year over year comparisons as well as the strength of the quarter on a stand-alone basis. SUNH recently established a new 52-week high and has seen its share price rally approximately 25% over the past four weeks. Continue your research on SUNH at: http://at.zacks.com/?id=2357.

To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=2358.

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=2359.

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SCREEN OF THE WEEK

Filtering the Zacks Rank

Kevin Matras outlines a strategy for trading the Zacks Rank in a very practical manner for almost anyone’s portfolio: http://at.zacks.com/?id=2360.

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

 
Archer Daniels Midland Company (ADM)

Archer-Daniels-Midland Company (ADM) engages in the procurement, transportation, storing, processing, and merchandising of agricultural commodities and products. The company operates in three segments: Oilseeds Processing, Corn Processing, and Agricultural Services.

In addition, the company engages in milling wheat, corn, and milo into flour, which are sold to commercial bakeries, food companies, food service companies, and retailers. It produces bakery products and mixes for the baking industry. The company also produces milo to produce industrial flour used in the manufacturing of wallboard.

The company is in the sweet spot of the government mandated move to ethanol. As a result, ADM registered more than doubled fourth-quarter earnings, driven by an increase in demand for processed oilseeds and corn byproducts such as ethanol.

Fiscal-fourth quarter earnings were buoyed by sharply rising ethanol prices, and once again easily beat analyst estimates. Quarterly profit totaled $410.3 million, or 62 cents per share, compared with a profit of $195.5 million, or 30 cents per share, during the same period last year. Analysts expected 53 cents per share.

The company said oilseeds processing operating profit grew 61 percent to $195 million, helped by market conditions. Corn processing operating profit increased 69 percent to $286 million due to better ethanol and sweetener selling prices and volumes.

"ADM delivered its second consecutive year of record earnings," said CEO and President Patricia Woertz. "Credit goes to the people of ADM and the alignment of our strategy, global portfolio of assets and strong management team. We have good momentum going forward and are well positioned to capitalize on our opportunities for continued growth."

Earnings momentum is in full force as evidenced by the last three quarters, in which the company has exceeded estimates by an average of about 18%. This year's earnings estimates have increased 9.7% to $2.59 over the past three months, while next year's numbers have jumped 11.5% to $2.90 per share.

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:

• +32.4% average annual return since 1988 versus +11.9% for S&P 500
   
• Outperformed S&P 500 in 17 of the last 18 years
   
• +43.8% total return from 2000 to 2002 - the worst bear market in over 60 years.
   
• +18% in 2005
   

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.

 
ZACKS RANK RESOURCES

• View All Zacks #1 Rank stocks : Go to http://at.zacks.com/?id=2351.
   
• Free Zacks Rank Guide: Learn how to use the Zacks Rank to pick more profitable stocks. Get the guide: http://at.zacks.com/?id=2549.
   
• Zacks Advisor: Discover Ben Zacks' hand picked #1 Rank stocks on his Timely Buys list at: http://at.zacks.com/?id=2550.
   
• Zacks Options Trader: Combine the timeliness of Zacks #1 Rank stocks with the explosive profit potential of options. Learn more at: http://at.zacks.com/?id=2689.
   
• Zacks Wealth Management: Own all the Zacks #1 Ranked stocks in a portfolio managed by Zacks. Learn more at:  http://at.zacks.com/?id=2551.
   

FREE PORTFOLIO TRACKER

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• Broker Recommendation changes
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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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Regards and Happy Investing,

Charles Rotblut, CFA

Senior Market Analyst
Zacks.com

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.

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