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Wednesday - August 15, 2007
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1. ZACKS RANK BUY STOCKS
Zacks #1 Rank stocks average a 32.2% 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 – Air Methods (AIRM)
Air Methods (AIRM) has significantly exceeded estimates in each of the past two quarters by an average margin of 96%. Not surprisingly, earnings estimates have been on the upswing. This year's numbers have jumped 21 cents to $1.86 per share over the past month. Next year's estimates have risen 30 cents to $2.28 per share. Analysts project long-term earnings growth of 23%. The stock has an ROE of 20%, double that of the industry average. Read the analysis of AIRM now!
Growth & Income – General Dynamics Corporation (GD)
General Dynamics Corporation (GD) exceeded analysts’ earnings expectations in 14 out of the past 16 quarters. After beating the Street’s second-quarter estimate, the company upped its full-year profit guidance. Analysts responded by raising their estimates. Earnings per share are projected to grow 10% over the next 3-5 years. On Aug 1, the Board of Directors declared a regular quarterly cash dividend of 29 cents per share. GD is currently yielding 1.50%. Read the full analysis on GD now!
Momentum – Sun Life Financial Inc. (SLF)
Sun Life Financial Inc. (SLF) has advanced over 18% year to date and is currently trading near 52-week highs. A breakout above current resistance would be particularly encouraging, adding support to the stock’s recent momentum. Read the analysis of SLF now!
Value – Calumet Specialty Products Partners, L.P. (CLMT)
Calumet Specialty Products Partners, L.P. (CLMT) recently beat the Street’s second-quarter earnings estimate by 14.6% when it posted profits of 94 cents per share. The result represented a 25.3% year-over-year improvement. Consensus earnings estimates for both this year and next year have risen over the past week. On Jul 13, the Board of Directors approved an increase to the company’s quarterly cash distribution to 63 cents per unit. This Zacks #1 Rank stock has a price-to-book ratio of 2.4, compared to 4.6 for the market and 2.9 for the industry. Read the full analysis on CLMT 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. Learn more about the Research Wizard.
”Lesson Learned from Hanging a Door”
This weekend I hung a new door in my home office.
After getting it home, I immediately got started. Since I’m a pretty handy guy, I figured it’d go pretty quickly. (I’ve made bookcases before, put in a pressed tin-ceiling once and I’m a pro at crown molding – so this was going to be a snap.)
After aligning the door and marking it for the hinges, I then ran into my first challenge.
The hinges needed to be recessed into the door so they’re flush. So I had to create a mortise for each hinge. To do that, you should have a chisel.
Since I didn’t have a wood chisel, I thought I could make do with a screwdriver.
Guess what – I could. BUT, as I banged away with my rubber mallet and screwdriver, I couldn’t help but think how slow and somewhat difficult this was becoming.
I started thinking about all the doors being hung out there and wondered if they were all this time consuming and difficult.
Anyway, I finally got the mortises carved out and hung the door.
Next, it was on to the door knob.
I had the hole-cutting saw and was ready to go. But I knew I had one more mortise to cut for the faceplate. This one required more precision, so I decided to run out and get the right tools, i.e. a sharp chisel.
This time, cutting the mortise couldn’t have been easier. The chisel went right into the wood with a simple tap. The beveled edge on one side and the straight edge on the other helped me to effortlessly carve out the groove for the faceplate.
And the rest of the installation went by in no time at all.
So why do I tell you about my experience in hanging a door? Because it’s one of those lessons that you can get from just living your life.
In this case, the lesson was: do the best job you can, always use the right tools.
It’s the same way for trading and investing.
You can try and make do with the wrong tools and inferior research – but it’s a lot harder and may not work out as well as you had hoped.
I was lucky that I didn’t ruin my door using the wrong tools. I then decided to finish the job with the right tools and it all went better than imagined.
Just because you haven’t ruined your account yet by guessing and hoping you’ve picked the best stocks, doesn’t mean that guessing and hoping is the right way to pick stocks.
I decided to get the right tools after worrying about ruining a $300 door.
But aren’t your investments worth a lot more than that?
If so, make sure you have the right tools to better manage your account, such as a good screening tool to help narrow down the universe of stocks to a practical watchlist.
A proven, profitable rating system that’s outperformed the market over and over again.
And a program to test your ideas to make sure they work before you put your money into the market.
Don’t invest without the right tools at your disposal.
With the right tools, you’ll find the task of managing your money (probably the largest, most important chuck of money you’ll ever be responsible for) to be easier and you’ll be happier with the results.
Here are three new stock picks from some of the winningest strategies of the Research Wizard (aka the right tool):
Start using the right tools in your own investing TODAY! Sign up for your two-week FREE trial to the Research Wizard. Remember the key to successful screening is in discovering those screens that have produced profitable results in the past. That’s exactly what you get with the powerful Screening and Backtesting ability of Research Wizard. You can do it Learn how today.
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
While investors in the U.S. consider looking abroad for strong investments and diversification, we are fortunate to be able to speak with Zacks senior foreign technology analyst Robert Perri, CFA about how the technology sector in Europe and elsewhere is progressing nowadays.
Has the sell-off in major markets, in the U.S. especially, been negatively affecting companies in your coverage?
Yes it has. Actually, a lot of the European companies have been down as well; many stocks have been battered with the recent sell-off. The European markets are also down, as well. But you have to be selective. Some stocks that have gone down were selling at lofty valuations to begin with, and while they were knocked down by the weakness in the markets, sometimes it’s better that they stay there. While other companies that have been beaten up have been for no reason. So it’s good to be selective in what you’re looking at.
More. . .
Is this creating some buying opportunities?
Yes it is. One of my primary Buy stocks is NDS Group (NNDS). They actually reported a great quarter and the stock went up on the day they reported, but then they also reported the day before the market tanked, and it got taken down with the rest of the companies. And it was knocked down more than it went up after great earnings results.
The company NDS is based in the U.K., but they sell throughout the world. They make the smart cards for cable set-top boxes, and they are I think 70% owned by News Corp. (NWS). They have a lot of clients that they get through News Corp., and they’re selling at, I think, 18 ½-times earnings. And they’ve been growing at 15% per year, and we expect that to continue in the near term, at least through 2008, 2009.
So it’s even a stronger Buy now that it went down along with the rest of the market, then?
Yes. It’s come back a little bit, so it’s about where it was after they reported, but it’s still only selling at 18.5x our 2008 earnings estimate of $2.58 per share. So we think it could go at least to 20-25x earnings. Around $58 per share is our price target.
In general, how has this earnings season gone for foreign technology companies?
This earnings season has actually been a lot like the first quarter in that a lot of the companies reported solid results, but they’ve been very cautious about what they expect in the second half [of the year]. Only a select few companies have raised their guidance. In fact, many companies have maintained their guidance after beating estimates in the second quarter. So they’re actually effectively lowering guidance for the second half of the year, despite strong results in the second quarter.
Are there any specific success stories that you’ve seen in Q2?
NDS did well, as I mentioned. They report in U.S. dollars even though they’re based in Europe, so the dollar helped their revenues a bit, but it also hindered their margins. But they were still able to cut costs strong enough that it didn’t affect their margins so well.
I think 60-70% of their expenses are based in the euro or British pounds – and much less than that of their revenues are derived in those regions. So they overcame that hit to margins, and still reported a great quarter.
Another company that actually did pretty well was SAP (SAP), despite the weakness of the dollar. SAP reported a pretty solid quarter, despite the fact that they had the currency smacking them in the face.
Santiago Burgaleta, CFA is a senior analyst covering the European markets for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Marathon Oil (MRO), Northrop Grumman (NOC), Countrywide Financial (CFC) and Computer Sciences (CSC). To see their latest posts, click here.
With earnings season winding down, 57% of companies are posting double digit year-over-year EPS gains. More...
4. ZACKS WEALTH MANAGEMENT
Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Today’s topic is:
With our natural inclination towards fear and greed, we must ask ourselves whether we are “hard wired” to be good investors. Take a moment to review your investment decisions over the last ten years. Those decisions, for most people, ranged from chasing technology returns (after it was too late) to sitting in CDs earning 3%-4% while the market moved up over 30% in 2003. I used to like roller coasters as a kid but as I have grown older and wiser I have become more honest with myself. Now I follow a much more disciplined approach.
For example, the returns we saw in 2002 when the market was down over 20% and then up over 30% in 2003 creates situations in which we are driven by fear and greed. We are not “put together” to make the right investment decisions because we are mainly acting on emotions. These two years are what we know as “outliers” because they deviate way beyond historical mean returns. I truly believe that in the long-run everything returns to its historical average. We have seen this occur within the technology sector. We are seeing that currently in real estate, and will eventually see it in the international arena.
My best advice is to step back and count to ten before selling at lows and buying at highs. Or better yet, do not look at your portfolio on a daily basis. Do not lose the forest in the trees! What has happened in the past is water under the bridge – DO NOT TAKE ON TOO MUCH RISK NOW ATTEMPTING TO MAKE UP FOR LOSSES IN THE PAST! The market historically returns about 10% on an annual basis- not 20% (I refer you to Exhibit A – Sowood Capital, led by one of the brightest managers for Harvard annualized 19% over the last ten years until it crashed just a couple of weeks ago).
The transparency of the stock market always allows us to see the risk/volatility on a moment by moment basis right in front us. Real estate, however, lacks this transparency and people presume that it appreciates in a straight line which is not the case. By being in the market, we can be rewarded with good returns by taking on risk. We are able to decide how much risk we want to take, and subsequently how much of a return we may receive.
Find an allocation that will work for your long-term objectives and risk parameters. Feel free to contact me at 888-600-2783 x 9251 to discuss an appropriate allocation for yourself.
I leave you with some advice from someone who knows something about how markets work:
“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” Warren Buffet
Be a Contrarian!
Fritz Fiebig 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.
5. Best of the Zacks $100,000 Challenge
Zacks is conducting a nationwide talent search to find the very best stock pickers. The winner gets a $100,000 dream job with Zacks! . Sign up for free to join the competition, or just read what stocks the leading players are trading on the Zacks Challenge Player Blogs.
Here's what the leading players are saying lately:
SRS USED AS A HEDGE FOR REAL ESTATE HOLDINGS (SRS)
TheInstitutional (Rank #10 with $168,877)
SUPPORT WILL NOT HOLD, EXPECT THE MARKET TO FALL AGAIN!
>> JAVA’S MARKET MUSINGS #114 <<
OTHER TOOLS FROM ZACKS
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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.
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Charles Rotblut, CFA
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Zacks Rank performance is the total return (price changes + dividends) of equal weighted portfolios, consisting of those stocks with the indicated Zacks Rank, assuming zero transaction costs. These returns are not the result of a backtest; these are actual returns since 1988. The stocks in the Zacks Rank portfolios were available to Zacks clients before the beginning of each month (monthly rebalancing). Performance results from 1988 through September 2006 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADR’s.
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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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