Tuesday - November 21, 2006
 Want to view the archive of past issues? Click here. Manage Profit from the Pros subscription: 1. ZACKS RANK BUY STOCKS 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 - Citi Trends (CTRN) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum - Robbins & Myers (RBN) When we first featured Robbins & Myers (RBN) as a Zacks Momentum Stock of the Day on Apr 27, 2006 we said “Once RBN is able to conquer overhead resistance at about $30, there really is not overhead resistance in this stock until the all time high of $40.50 set on Dec 18, 1997”. The stock cleared that $40.50 level on Oct 23 but failed to close above that level. RBN did mange to close above the old highs on Nov 13. With this old resistance cleared, it’s obvious that the line of least resistance is to the upside for this stock. Read the full analysis on RBN now! On Nov 11, NBTY Inc. (NTY) reported fourth-quarter earnings per share of 54 cents. The result amounted to a 38.5% positive earnings surprise with analysts calling for 39 cents. Revenues rose 7.5% to $467.9 million from $435.2 million in the prior-year period. NTY is up nearly 31% since it was first featured as a Value stock on Jun 2. Read the full analysis on NTY now! Find the best-performing stocks within the Zacks #1 Rank list each week. Last week’s top performers included IntercontinentalExchange (ICE) with a 18.9% gain.
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. Allis-Chalmers Energy Inc. (ALY) recently reported another record quarter. Third-quarter earnings were 50 cents per share, which soared past last year’s eight cents and exceeded the consensus estimate by 11%. Revenues increased by 197% year-over-year. Allis-Chalmers Energy produced annual earnings growth last year of 629% above the year-prior. Read the full analysis on ALY now! BluePhoenix Solutions Ltd. (BPHX) recently posted third-quarter earnings of nine cents per share, which was a penny above the consensus estimate. The company noted that its steady increase in revenues is mainly attributed to the broadening awareness and acceptance of the inevitability of IT system modernization. BPHX experienced earnings per share growth of 90% during the most recent year, versus the year-prior. Read the full analysis on BPHX now! Gaiam Inc. (GAIA) delivered 125% growth during the most recent year, compared to the year-prior. The company recently released financial results for the third quarter. Gaiam saw a year-over-year revenue increase of 71.8%. Third-quarter earnings per share totaled six cents, doubling the previous year’s three cents. The company mentioned that the retail business remained strong and growth in the direct-to-consumer segment exceeded its expectations during the quarter. Read the full analysis on GAIA now! Globecomm Systems Inc. (GCOM) recently announced fiscal first-quarter earnings of six cents per share, topping the year-ago total of five cents and jumping ahead of the consensus estimate by 500%. The company remarked that the future is bright and it looks forward to an exciting year. GCOM meets the criteria of this Profit Track as evidenced by its year-over-year earnings per share growth of 69%. Read the full analysis on GCOM now! To see the full list of stocks that currently pass this winning screen, 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 this powerful stock picking tool. Learn more about the Research Wizard free trial offer and our new special report “Top 10 Stock Screening Strategies”. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Diversification and Portfolio Weighting Kevin Matras shows how a good stock screener can be your best tool for picking options. More... 3. ZACKS EQUITY RESEARCH With the gradual slowdown continuing in the housing market, we were interested in finding out if this has started to have an effect on other industries, such as machinery. To find out, we sat down with senior machinery analyst Mario Ricchio for his perspective. Last time we talked about machinery, growth was still looking quite strong. Has anything changed? The fundamental growth outlook is worsening. Within our coverage universe, we anticipate the average machinery company to grow fiscal year (FY) 2007 earnings 10%, down sharply from 20% growth in FY 2006. The culprit is the slowdown in construction machinery, and it is negatively impacting the profit outlook for two specific companies in our universe: Caterpillar (CAT) and Ingersoll Rand (IR). More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Caterpillar missed third quarter earnings estimates on account of lower machine sales volume in North America. With our 2007 forecast calling for a 12% decline in housing starts, we believe the company will experience lower sales of skid steer loaders used on construction sites. Ingersoll Rand fell victim to the slowdown in residential housing as well. This is evidenced by the 35% decline in third quarter Bobcat sales. We expect both companies to report less than 10% EPS growth in FY07. Have valuations come down at all, or are they still relatively high? We use P/E multiples to value machinery companies. On a valuation basis, the median multiple in our machinery universe is 12.7 times forward earnings, down from 15.7 times at the beginning of this year. While this P/E multiple may seem reasonable considering our forecast for 10% EPS growth next year, historically valuations tend to contract as the market looks past peak growth and begins to discount a deceleration in earnings growth. This is what we believe is occurring right now. As a result, we do not view contracting P/E multiples as a sole reason to be aggressive buyers of a machinery stock. In the long-run, investors tend to experience higher returns when buying shares at a very high P/E multiple, since the trough of earnings is already discounted into the story and the bar is set so low it can exceed street expectations. With energy prices having come down in recent months, what kind of affect has this had on machinery companies? The impact from lower energy prices has been limited on machinery companies. As long as oil prices maintain above $50 a barrel, the outlook for energy-related products—such as petroleum engines—appears bright. With current prices above $60 a barrel, we have not seen a slowdown in orders. In fact, across our industry coverage, we find energy equipment orders have consistently generated the strongest growth of all market segments. Terex (TEX), Dover (DOV) and Caterpillar continue to report strong growth tied to energy-related products, and the outlook remains positive. Due to the secular growth potential of the energy equipment market, rather than a cyclical story, we believe earnings sustainability remains a little higher than the market anticipates for the overall machinery industry. The strength in mining & energy machinery markets are helping to offset the slowdown in construction machinery. Also, lower energy prices have the indirect effect of lowering a company’s operating costs, which flows right to the bottom line. Despite our dire outlook for construction-related equipment, the strength in energy markets helps to explain why we still expect 10% EPS growth for the average machinery company in FY07. Click here to read the complete Analyst Interview. Mario Ricchio is a senior analyst covering the mining & machinery industries for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Home Depot (HD), Dynavax Technologies (DVAX), Gander Mountain (GMTN) and Linktone (LTON). See their latest posts: click here. FormFactor, Inc. (FORM) - Poised for Expansion. For full Zacks research report, click here. Infineon Tech (IFX) - Divisions Still Unprofitable. For full Zacks research report, click here. The Week of Nov 20 – Nov 24 2006 Estimates Rising Find out which stocks have been recently upgraded by Zacks Equity Research: click here. Read the reports on all of the stocks on the Zacks Equity Research Buy List: click here.
4. 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. Zacks/Schaeffer’s Options Trading service. This week, we’ll take a look back at a recent pick and see how it’s done. Remember, this is one of the most important parts of becoming a good trader – examining what works for you and, more importantly, what doesn’t work. Don’t beat yourself up over a bad trade, because sometimes things happen that can't be controlled. You must learn that some trades don’t work and there’s nothing you can do about it. Finally, we’ll take next week off due to the Thanksgiving Day holiday, so we’ll be back in two weeks to look at another filter. Back on Oct 9, we took a look at the Unusually High Option Volume filter for calls and determined that US Steel (X) looked like a nice bullish play. In fact, here’s how that observation ended, “Add it up and I feel X could make a nice play over the coming months and would thus recommend playing an intermediate term call on it. Write it down and let's see how we do, but right now it looks like a nice play.” So how have we done you ask? The shares are up more than 10% over this timeframe. Sparking the shares on Friday were rumors a Russian steelmaker could buy X – sending the shares up significantly. Now we’ll repost exactly what we said back on Oct 9 to see what it was that we liked about X and led us to become bullish on the shares. We can’t stress enough, this is a very important process that you must do to improve your trading over the long run. Without further ado, here’s what we said: “Looking at the list on Friday afternoon, one name that struck us as intriguing was steel giant US Steel (X), which had more than 16,000 puts trade - amounting to more than twice its average daily put volume. The steel sector has taken a beating the past few months, but has recently shown some signs of life. In fact, just this week, numerous steel names have broken several month downtrends and moved above their 50-day moving averages - both signs that the downtrend could have run its course. Looking at commodities in general, Bernie noted the other day that the Commodities Research Bureau Index (CRB) - better known as the CRB, is down near the nice round number of 300, which also coincides with its 160-week moving average. In other words, CRB has an above average chance of at least a bounce. Turning to X, it has a ton of puts at the 55 level. We won't get into it here, but we view all of these bearish puts as having the potential to serve as strong support. It has to do with how market markers are hedged. Looking at the chart of US Steel you can see what it did the past few days, as it bounced big time from the $55 level and it moved above its downward sloping 50-day moving average for the first time in several months. Again, this is a sign of a potential change in the downtrend. So we know that the crowd has been trading a lot of bearish puts on X recently, and there is huge put support at 55. This fact coupled with some improving technicals on X and other steel stocks signals that we could have a nice trade on our hands. Now let's look at the sentiment. Remember, we want to see skepticism as a sign that there's cash left on the sidelines to push it higher. First, one indicator that we like to use to measure sentiment is the Schaeffer's put/call open interest ratio (SOIR). This ratio shows how many bearish puts there are compared to bullish calls for the front three months of options. Currently, X's SOIR checks in at a solid 1.23 -a sizeable number. Looking at that number versus the past year's worth of readings shows that this reading is higher than 70% of those taken during the past year, suggesting short-term option players are solidly in the bear camp. Short selling is one stock-trading strategy that involves selling a stock with the intention of buying it back later at a lower cost. In other words, you are betting that the shares will go down. For a bullish play, we want to see a good amount of shorts betting against the shares, increasing the odds of a short covering rally on any good news. Looking at X, we see that nearly eight percent of its float is sold short - showing more bearishness. Finally, analysts are also bearish toward X. According to Zacks, there are five "buys," five "holds," and two "sells." Should the shares begin to outperform, there's plenty of room for upgrades from this group. Add it up and we feel X could make a nice play over the coming months and would thus recommend playing an intermediate term call on it. Write it down and let's see how we do, but right now it looks like a nice play.” There you go. We hope you learned something from that and here’s to more successful trades down the road. And please continue to use all of the filters on these pages for more money-making ideas, and don't be afraid to make a few paper trades to see what strategy works best for you. Please remember that, when it comes to options, the majority of your trades are going to be losers. Don't get discouraged, because that's the beauty of the leverage that options provide. It takes only a few winners out of every 10 trades to make you a very happy investor. Good luck! 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. Leverage the timeliness of Zacks #1 Rank stocks with options trades that maximize profits and minimize risks. Learn more about our new Options Trading service. 5. FEATURED EXPERTS Here we cast the spotlight on a timely Featured Expert commentaries that recently appeared on Zacks.com. Jack Adamo expresses his concern over the housing market and provides updates on a few stocks. Benefit from his insight. More... Dr. Melvin Pasternak illustrates how the S&P 500 experienced small gains that have added up. Benefit from his technical analysis. More... 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. Or view the full list of Zacks #1 Rank 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! 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 05/21/2013
| Company Name | Symbol | %Change |
|---|---|---|
| SCIENTIFIC L | SCIL | 8.00% |
| NATUS MEDICA | BABY | 6.11% |
| SUMMER INFAN | SUMR | 6.02% |
| RADIANT LOGI | RLGT | 5.32% |
| NEW ORIENTAL | EDU | 4.51% |
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