Thursday - October 7, 2004

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Here we cast the spotlight on a timely Featured Expert commentary that recently appeared on Zacks.com. Following the article you will find previews of other profitable commentaries with insights and recommendations from leading investment experts.

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Investment Outlook

Subscribers tell Kelley Wright and his team that one of the attributes of IQ Trends they find most attractive is that one needn’t be an investing maven to understand buy at Undervalue, hold a Rising Trend and sell at Overvalue. Fair enough; complexity should not be a requisite ingredient in the recipe of success.

For subscribers whose sole interest is having a mechanism that eliminates much of the subjectivity that is associated with portfolio execution, Wright’s four categories and their associated stock tables are as close to advisory Nirvana one could ever hope to find on this earth. For subscribers that want more detailed analysis and commentary on and about the complexities of today’s global marketplace, Wright produces this piece and special features with the intent of being cogent yet erudite and hopefully clever. He recognizes that for some subscribers it simply isn’t sufficient to have an investment methodology that eliminates the necessity for understanding the reasons why when why can be so interesting.

Wright and team’s approach, when followed faithfully, has proven to provide consistently superior returns to investors with long-term time horizons. The approach, when followed faithfully, occasionally calls for having the patience of a saint. During these times Wright finds it useful to at least try and understand the seemingly irrational movements of the markets and its participants. These efforts sometimes lead to questions, if only in the rhetorical sense, through which Wright processes information and filters through the “noise” and eventually comes to understand the current dynamic and the catalyst for same.

While learning the answer to the question “why?” doesn’t alter the time/space continuum, it is useful for one’s belief system in that answers are absolute; they either confirm one’s analysis or disprove it altogether. Either scenario is preferable to “I don’t know.”

In this issue Archer Daniels (NYSE: ADM ) returns from its status as a Faded Blue to the regular pages of Select Blue- Chips. Along with a recent dividend increase, we find ADM’s yield has risen to historic levels of value. The company was founded in 1902 as Daniels Linseed Co. and is today one the world’s largest agriculture processors. The company’s major segments have been reorganized into Oilseed Processing, Corn Processing, Agricultural Services, and Other.

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FEATURED EXPERTS Continued...

On a fundamental basis, ADM paints a strong picture of value. The recently increased dividend is safely covered by earnings, while the company’s long-term debt to equity remains ideally low. The settlement of a recent corn-syrup price-fixing lawsuit saw the company realize a $252 million after-tax charge. The impact of additional lawsuits is not yet clear, but should only cause temporary setbacks. Though a pullback from a recent jump in share price would provide a timelier buying opportunity, ADM’s current position would seem to justify limited purchase even at current levels.

Though natural gas was known to the ancients thousands of years ago, modern industry is credited with developing the fuel into a viable commodity. Often found with crude oil deposits, the gas is most abundant domestically in Alaska, Texas, Louisiana, New Mexico, and Oklahoma. Atmos Energy (NYSE: ATO ) began its history in the Texas panhandle during 1906. With over 1.7 million customers, it is one of the largest natural gas distributors in the United States. Operations currently encompass a utility segment, a natural gas marketing segment, and a segment primarily responsible for storage services. Since Wright and his team last featured ATO, the company has purchased the distribution and pipeline operations of competitor TXU Gas. These additional assets will provide an immediate boost to earnings for fiscal 2005 by $0.05/shae to $0.10/share. Funding for the $1.93 billion purchase price has come from a mix of long-term debt and additional equity offering. The new combined operations make Atmos the largest gas-only utility in the entire United States. Operations in 12 states count more than 3.1 million customers.

Based on its recently augmented operations, ATO shares offer additional growth potential in coming years. The company’s debt makes it subject to rising interest rate expenses. Though the payout ratio is high, it is within normal ranges for a utility company. Investors making purchases at current levels should be prepared to withstand possible fluctuations back into Undervalue until TXU is fully integrated into the company.

 
About Kelley Wright’s Investment Quality Trends

Investment Quality Trends is the #1 performing newsletter on a risk-adjusted basis for the past 15 years -- through 1/31/2001 according to industry watchdog, Mark Hulbert, who ranks the top performers in the investment newsletter industry. Find out why we`re #1.

Learn more about this newsletter and free trial offer at: http://at.zacks.com/?id=269.

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MORE FEATURED EXPERTS...
 

b) Upside Potential Outweighs Downside Risk

Jim Collins and his team believe that third quarter earnings will be strong. Find out why you shouldn`t be too concerned if companies stay cautious with their expectations, and then learn about three attractive stocks for the week. More...
 

c) Building Blocks for the Capital Goods Sector in High Demand

Price Headley reviews the economic and chart factors that are creating a solid bullish bias in one sector. More...
 

d) Myriad of Threats to Market

Dennis Slothower lays out the threats that will be revealed in third quarter economic and earnings growth. Discover why he sees signifant danger on the horizon. More...
 

e) S&P Approaching Critical Resistance Test

Dr. Melvin Pasternak reviews the recent movement in the S&P 500 and spotlights a resistance point that index is approaching along with what he expects. More...
 

f) Can the Momentum Continue?

Jeff Carter and his team believe the market may be poised to break out of its bearish trading pattern. Find out what levels the indices would have to reach for this to occur, and learn how to take advantage with a call and LEAP option. More...
 

Featured Expert articles are courtesy of the 60+ leading investment newsletters that have partnered with us to create the Zacks Expert Advice service. Check out the Experts section of Zacks.com daily to find profitable stock picks and timely market commentary at: http://at.zacks.com/?id=637.

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Zacks.com offers 3 unique weekly commentaries that all further our mission to help you Profit from the Pros. Today is the latest installment of Experts Watch from Trace Johnson. Each week Trace shares winning strategies from leading investment experts to outperform in any market environment.
 

Second Anniversary – End or New Beginning?

For all of the hemming and hawing about market direction, we are higher than the last total capitulation, and what some would call the beginning of the current bull market, that began on October 9th, 2002. A number of fundamental factors are clearly threatening the advance of the market throughout the rest of the year, and the Experts are devising strategies to account for those obstacles. The charts bear out these dangers in the form of trends of lower highs and lower lows, though some crucial resistance level tests are in the immediate offing. Read about the targets that will indicate it is safe to reenter the market and the portfolio strategies and stock picks you can’t live without.

 
Fundamental Risks

Dennis Slothower, editor of Stealth Stocks, began his monthly newsletter with a comment about the poker craze that is crossing the nation. The best poker players, he notes, know that most hands aren’t worth betting. In fact, poker players practice the same money management skills Slothower insists are critical for any trader/investor. You want to maximize your bet when you have the best of it, and minimize your bet when you don’t in order to ensure you are offering yourself the largest probability for the most amount of profit. Applying that strategy to his market timing indicators, Slothower is currently waiting for his next big hand, which he is confident will come before the end of the year.

More...

• Medical device trade with solid short-term upside potential.
   
• Specialty pharmaceutical company with 67% revenue growth in the first six months of the year.
   
• Small panel display component company with explosive net income growth.
   
• Review of the fundamental and technical factors that should give investors pause, and why some expect the market to move higher nevertheless.

And More...

Click here to read the full article with commentary and recommendations from leading market experts. http://at.zacks.com/?id=14
 

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PREVIOUS WEEKLY COMMENTARIES….
 

SCREEN OF THE WEEK

Big Money

Kevin Matras goes over his ‘Big Money’ screening strategy that picked up over 100% in 2001 and over 200% in 2002 and 2003! See why it’s called ‘Big Money’ and get this week’s picks. More...
 

ALL STAR TOP PICKS

Crystal Clear Outlook for Cable and Entertainment Industry

With diverse broadband services connected to more homes than ever before, it's no wonder the cable and entertainment industry is taking off like a rocket. More...
 

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The analysts from Zacks Independent Research create a mountain of insightful equity research everyday of the week. Here you will find the best of that information recently published on Zacks.com.
 

BULL OF THE DAY

E Freddie Mac (FRE) - The worst is over
Full Zacks research report at: http://at.zacks.com/?id=1412.

 
BEAR OF THE DAY

Identix, Inc. (IDNX) - Temporarily over-valued
Full Zacks research report at: http://at.zacks.com/?id=1413.

 
ZACKS ANALYST INTERVIEW

E&P Oil: Gains Have Led to High Prices
How long will oil and gas prices remain at these historically high levels? This issue not only affects the valuation of the stocks, but it also has implications for the strategy of an E&P company. More...

 
ZACKS INDUSTRY OUTLOOK

Coal Industry - Neutral
Though recent trends indicate improvements in coal's fundamentals, the ability to benefit from stronger prices is limited to the unpriced portions of planned production levels. More...

 
ZACKS MARKET COMMENTARY

Will GE and Alcoa Affect the Markets This Week?
In a relatively light week, the markets will be gearing up for next week's start to the third quarter earning's season. More...

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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 Profit Track provides an attractive shorter term trading strategy for those who want a stocks price momentum to be in their favor. Then just to be sure, we also want the fundamentals to be sound as well. The end result is a strategy that has been consistently beating the market each of the last 3 years. The key element in this screen is finding stocks currently on the move and that are trading in the upper ranges of their 52 weeks highs.

Below you will find all the Parameters used in this strategy as well as detailed Performance information. This strategy proves that the “trend is your friend” with a +111.9% return in 2003. This screen looks for stocks trading in the upper range of their 52-week highs. These stocks have generated an average annual return of +61.4% over the last 3 years.

 
Here are 3 stocks that make the grade for the Recent Price Strength

Kmart Holding Corporation (NASDAQ: KMRT) and its subsidiaries (together, "Kmart") is a mass merchandising company that offers customers quality products through a portfolio of exclusive brands that include Thalia Sodi, Jaclyn Smith, Joe Boxer, Kathy Ireland, Martha Stewart Everyday, Route 66 and Sesame Street. The company has had a storied fall, but the rebound looks to be just as interesting a read. Kmart reported financial results for the second quarter of fiscal 2004 in August. For the 13 weeks ended July 28, 2004, the company reported net income of $155 million, or $1.54 per diluted share. Kmart had reported a net loss of $5 million or (6 cents) per diluted share for the same period in 2003. The company is currently trading at its 52 week high and is up 10% over the last 4 weeks. To continue your research on KMRT, click here.

Firstsource Corp. (NASDAQ: SRCE) offers a broad range of commercial banking, personal banking and trust services. In addition, 1st Source Bank provides highly specialized financing services for: automobile fleets in the rental and leasing industries; privately-held used aircraft; heavy duty trucks and construction equipment. The company reported second quarter net income at the end of July that was 88% higher than the same period of 2003. Earnings estimates for 2004 are 9% higher than they were 90 days ago and the company is trading within a dime of its 52-week high. To continue your research on SRCE, click here.

Giant Industries (NYSE: GI) is engaged in the refining and marketing of petroleum products. The company reported earnings on August 9th of $5 million, or 44 cents a share, compared with $447,000, or 5 cents a share, in the same period a year ago. Oil is continuously pushing to new highs and Giant is in a position to benefit from that. The company’s stock price is trading within 2% of its 52-week high and is up more than 22% over the last month. To continue your research on GI, click here.

 
To see the full list of stocks that currently pass this winning screen, then click here.

All the Profit Track strategies were created and backtested using the Research Wizard software from Zacks Investment Research. If you like this Upgrades and Revisions strategy, but want to narrow down the list of stocks and even improve the performance, then you should start a free trial to the this powerful stock picking tool. Learn more about the Research Wizard and Free Trial offer at: http://at.zacks.com/?id=1370

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

Men's Wearhouse (MW)

With a business strategy tailored for growth, The Men's Wearhouse has made alterations even a haberdasher would be hard- pressed to follow. One of the largest discount retailers of men's business attire in the US, the company now operates about 690 stores in 44 states and Canada. Its primary operation is Men's Wearhouse, which has about 500 stores (mostly in strip malls). The chain sells tailored suits priced 20% to 30% less than competitors, as well as shoes, formal wear, and casual clothes. The company's K&G Men's Center subsidiary (about 60 superstores) and its Suit Warehouse chain (five stores) sell clothes for even less. The founding Zimmer family owns about 9% of The Men's Wearhouse.

The Men's Wearhouse Inc. second-quarter profit rose 60 percent on strong sales gains.Men's Wearhouse earned $18.2 million, or 50 cents per share, in the three months ended July 31. That's up from $11.4 million, or 29 cents per share, a year ago. The results beat analysts' estimates of 44 cents per share, according to a Thomson First Call survey.

 
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Timely Buy of the Week Continued…
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Men's Wearhouse said it expects third-quarter sales will be between $343.1 million and $348.1 million, an increase of 6.4 percent to 7.9 percent. The company also predicted it will earn 32 cents to 34 cents per share for the quarter, above analysts' estimate of 27 cents per share. The retailer said it expects to open six new stores in the third quarter and seven in the fourth quarter for a total of 16 new stores opened by the end of the fiscal year.

Men's Wearhouse' net sales for the first quarter ended May 1, 2004 increased 15.2% to $360.7 million from $313.1 million for the same period a year ago. Net earnings were $15.1 million, or $0.41 diluted earnings per share, for the quarter, compared to net earnings of $11.0 million, or $0.28 diluted earnings per share, in the same period a year ago.

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 Ranked (Strong Buys) have produced the following results for investors:

• +33.1% average annual return since 1988 vs. +12.0% for S&P 500
• Outperformed S&P 500 in 15 of the last 16 years
• +43.8% total return from 2000 to 2002, which was the worst bear market in over 60 years.
• +74.7% gain in 2003

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.

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 at: http://at.zacks.com/?id=1424.

Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=1423.

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,

Stephen Reitmeister

Editor-in-Chief
Zacks Profit from the Pros

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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