Wednesday - January 17, 2007
 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 31.8% 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 – Huaneng Power (HNP) Since we first highlighted Huaneng Power's (HNP) stock has been on a roll and with good reason. The company is experiencing strong growth due to its plan to diversify its business and increase its efficiency. Next year's earnings estimates have jumped 24 cents to $2.30 per share over the past two months. Additionally, the company pays out a nice 3.2% dividend. Read the full analysis on HNP now! Growth & Income – UBS AG (UBS) Since UBS AG (UBS) has increased shareholder value through both share buybacks and distribution of dividends. In fact, the company increased its annual dividend in July by 7% to CHF1.60 (US$1.28) per share. UBS is currently yielding 2.1%, with a five-year average dividend yield of 2.3%. Over the past year, UBS has been very active making various acquisitions. Consensus estimates have been on the rise for both this year and next. Read the full analysis on UBS now! More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum – Terra Industries, Inc. (TRA) Since Terra Industries, Inc. (TRA) is an industry leader in the production and marketing of both nitrogen products and methanol. Terra is one of the largest producers of anhydrous ammonia and nitrogen solutions in the United States and Canada and of ammonium nitrate in the United Kingdom. In addition, Terra is one of the largest U.S. producers and marketers of methanol. Read the analysis of TRA now! Value – Gardner Denver, Inc. (GDI) Gardner Denver, Inc. (GDI) topped analysts’ earnings expectations for the past 12 quarters by an average margin of 23.9%. In addition to posting solid results for the third quarter and first nine months of the year, GDI upped its 2006 earnings per share guidance. Analysts responded by revising their profit forecasts upward. This Zacks #1 Rank stock has a price-to-book ratio of 2.4, compared to 4.9 for the market. Read the full analysis on GDI now!
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. Click here to learn more about the Research Wizard. ’Magic Numbers’ and Relative Valuations Many people seem to believe there are some “magic numbers” out there that equate to stock-picking success. Two things in particular that I hear over and over again relates to P/E Ratios and Price/Book Values. For some reason, many people believe that P/E Ratios of 20 or less and Price/Book Values of 1 or less are these so-called “magic numbers”. Unfortunately, statistics prove otherwise. Looking at the best-performing stocks of 2006, only 41% started with P/E’s (using 12-month EPS Actuals) of under 20 while the other 59% were over 20. (“Best-performing” is qualified by stocks that were trading at $5 or higher at the beginning of the year, traded on average of 50,000 shares a day and that have increased in price by 50% or greater by the end of the year.) This may or may not sound like a big deal. But, if you limited yourself to only those stocks with P/Es under 20, your screen would have excluded nearly 60% of the best-performing stocks from your radar screen. And that is a big deal. True, there were/are stocks in there with P/Es under 20, but you would’ve missed a lot of fantastic winners if you excluded those over 20. As for the Price/Book Value, the median P/B was 2.9 at the beginning of the period and nearly 4 (that’s right, 4!) by the end. Percentage wise, only 2% of the stocks had P/Bs of less than 1 at the start. Which means, using the ‘magic number’ of 1 for a P/B value would have excluded nearly every top performer of 2006. So if you’re determined to look for stocks with ‘low’ valuations (P/E, P/B), try looking for ‘low’ valuations as compared to their Industries. Why? Because 68% of the stocks on that list of winners had P/Es under the average for their Industry and over 62% had P/Bs under the average for their Industry. This means the majority of the best companies would have made it through a relative valuation screen, giving you a chance to buy them. So instead of thinking about ‘low’ valuations as an absolute number, try thinking about them as a relative measure. And I’ve found that companies outperforming their Industries on earnings, but are ‘undervalued’ to their group in terms of valuations, are great candidates. So in this week’s screen, I’m looking for companies with upward price momentum that are trading over $5, have a minimum average trading volume of 50,000 shares a day, have shown positive EPS growth over the last two quarters that’s greater than their Industry’s average and have lower P/Es and Price/Book Values than their Industry’s average. There were 23 companies that passed this screen for Tuesday 1/16/07. Here are three of them:
Click here to learn more about the Research Wizard stock picking and backtesting software and to sign up for a free trial . Discover all the Free Screening Tools on Zacks.com now! 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. ZACKS EQUITY RESEARCH Ahead of fourth quarter and full-year 2006 earnings reports in the homebuilding sector, we wanted to speak with senior analyst Mario Ricchio about whether or not a pullback is imminent in 2007. If so, how should we investors position ourselves with regard to the sector going forward? D. R. Horton recently reported a net decline in net orders. How do you see this affecting the company? D. R. Horton (DHI) reported a 24% decline in first quarter net orders. The weakness was broadly distributed with all six regions showing negative y-o-y comparisons. The drop in first quarter orders provides a sound reason for management to continue its aggressive stance on reducing the inventory of homes under construction, decreasing cost of goods sold (COGS) inline with lower unit deliveries, and lowering its land lot inventory through the write-off of land option contracts. As positive as these steps are in the long-term, unfortunately, it does very little to change the near-term fundamentals. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - More importantly, when a homebuilder cuts its starts and takes a write-down to reduce land lots under option, it should say to investors that a material slowdown is underway and to lower overall expectations for the sector. In the case of DHI, we believe the days of double-digit sales growth have come and gone for now. For the fiscal year 2007, our forecast calls for revenues to actually decline 5%, due in large part to a higher cancellation rate driven by lower speculative demand for homes. Do you expect to see a pattern emerging along these lines for the housing market as a whole? I do expect a similar pattern emerging for the housing market as a whole. In our view, DHI is an excellent proxy for the industry. It is the largest U.S. builder in terms of deliveries with 53,000, and it operates in over 27 states and 84 markets across the United States. Consequently, if DHI reports lower sales in, say, California, it typically follows other builders will too. In fact, during the housing boom, DHI was taking market share along with other publicly-traded builders thanks to favorable access to land lots and economies of scale in purchasing relative to smaller, private builders. In other words, the company was growing faster than the industry. As a result, a housing slowdown should lead to an industry downturn at least as large in percentage terms relative to the publicly-traded builders such as DHI. Do you adhere at all to the sentiment in the industry that “the worst of the housing market is behind us”? Overwhelmingly, the sentiment among many industry observers and market forecasters is that a bottom is near and that the worst is behind us in the housing market. We beg to differ for a variety of reasons, some of which necessitate having a historical perspective. First, investors shouldn’t ignore the fact the last four housing cycles hit a trough with starts around 900,000 units. November housing starts came in at approximately 1.58 million units, a sharp drop from a peak of over 2 million units, but well above the usual historical bottom. Second, investors shouldn’t ignore the fact that permits – a leading indicator for housing activity – tends to hit a trough near 800,000. In November, permits came in around 1.5 million, well above the trough seen in prior cycles. Essentially, the historical data suggest we need to go a lot lower in terms of starts and permits. We do not believe it is different this time. The inventory of homes unsold on the market totals 545,000, or about 6.3 months’ worth based on the current sales rate. This means builders will need to take supply off to balance the market with a lower level of sales and to reduce the probability of a significant price decline. Finally, we believe a few risks exist that could undermine the favorable economic backdrop for housing. In recent years, the housing market had the simultaneous benefit of a historically low mortgage rate and unemployment rate. But we think that could change, with two scenarios most likely. The first scenario hinges on job growth reaccelerating, but at the expense of higher, long-term interest rates for homeowners. This would decrease affordability measures, assuming wages continue to stagnate. The second scenario includes the economy dipping into Recession caused by the job losses created in the housing industry. In that case, a higher unemployment rate decreases the potential pool of homeowners available to the market and increases the risk of foreclosures and delinquencies. Read the complete ANALYST INTERVIEW article. Mario Ricchio is a senior analyst covering the homebuilding sector for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Rockwell Automation (ROK), UBS AG (UBS), Anheuser-Busch (BUD) and AXA Group (AXA). To see their latest posts, click here. Anheuser-Busch (BUD) - Solid Trends & Valuation. For full Zacks research report, click here. Centennial Communications (CYCL) - Cashflow Issues. For full Zacks research report, click here. The Week of Jan 15 – Jan 19 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. ZACKS WEALTH MANAGEMENT Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Today’s topic is:
Managing uncertainty is the name of the game in all aspects of financial planning. You are probably familiar with the ups and downs of stocks, real estate, commodities and other investments. You plan around these peaks and valleys through diversification. Are you doing the same in terms of future tax rates? You may feel you have things covered in this area by putting money in Roth IRAs/401(k)s or deferring sale of appreciated stock. But it is not that easy. Historically, tax rates have had their own peaks and valleys also. The History of Taxes Over 50 years ago, the highest tax bracket was 91%. Amazingly, single tax payers who made $200,000 or more kept only nine cents of the next dollar earned. 91 cents went to the government and you got to keep 9 cents! Thankfully, that rate dropped to 77% in 1964 then 70% in 1965. It would hold there until 1982 when the highest marginal tax rate went to 50% after The Economic Recovery Tax Act of 1981. Keep in mind that lower income levels were in place as well. It only took $41,500 single, $85,600 married filing jointly to reach this top bracket in 1982. The year 1983 saw these income levels increase to $55,300 single and $109,400 married when the Tax Equity and Fiscal Responsibility Act of 1982 came into effect. After 1984 the income levels were adjusted for inflation. The top rates dropped again in 1987 and in 1988 it went down to 28% as a result of The Tax Reform Act of 1986. Bear in mind that brackets went up again in the 1990s courtesy of The Omnibus Budget Reconciliation Act of 1990 and 1993 with top rates going as high as 39.6%. The Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 brought the top brackets down to their current rate of 35%. When doing any kind of tax planning you can’t assume the tax rates in existence today will exist in the future. Uncertainty in the Social Security system or even the dreaded alternative minimum tax can throw a monkey wrench into your future tax planning as well. There are many variables to keep in mind too. Your income could drop and put you at lower tax rates. That is generally safe to assume. However, if you are like some folks I know, those IRA required distributions end up putting or keeping you at higher brackets. This could happen if you built up a huge amount of wealth in your retirement plans. Keep in mind also the current budget deficit our country is running. Some people believe that the current budget deficit, historically low tax rates, and the governments spending plans could result in higher taxes in the future. As complex an area as tax planning is already, history and the variables make it a more difficult issue. Don’t worry though. Next week we’ll discuss certain types of planning to that can help you whether tax rates go up or down. Jonas Zamora is a Certified Financial Planner™ professional This article is provided for informational purposes only and does not constitute legal or tax advice. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. CFP Board, a nonprofit regulatory organization, fosters professional standards in personal financial planning so that the public values, has access to and benefits from competent and ethical financial planning. CFP Board owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame logo), which it awards to individuals who successfully complete initial and ongoing certification requirements. CFP Board currently authorizes more than 50,000 individuals to use these marks in the United States. For more about CFP Board, visit www.CFP.net. Learn more about Zacks Wealth Management now! - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - MITCH ZACKS ON THE MARKETS The stock market should begin to benefit from flows of assets out of other investment classes. More... 5. FEATURED EXPERTS Here we cast the spotlight on a timely Featured Expert commentaries that recently appeared on Zacks.com. Dr. Melvin Pasternak explains that the market remains technically vulnerable despite the S&P’s retest of its previous high. Benefit from his analysis. More... Bill Martin profiles an online brokerage, calling its business model a thing of beauty. Read about this broker’s first quarter.More... Steve Mckee expects a sell off right now and then a rally in the second half of the year. 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 (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 Ranked stocks. 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. 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 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. 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 06/18/2013
| Company Name | Symbol | %Change |
|---|---|---|
| STAAR SURGIC | STAA | 10.98% |
| LUMOS NETWOR | LMOS | 5.70% |
| INSTEEL IND | IIIN | 5.28% |
| ERICKSON AIR | EAC | 5.10% |
| ASSURED GUAR | AGO | 4.98% |
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