Thursday - June 9, 2005
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=114. Get Profit from the Pros content in Real-Time. Learn more about this free tool at: http://at.zacks.com/?id=1517. Manage Profit from the Pros subscription: 1. FEATURED EXPERTS 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.
The major averages moved slightly lower last week. But once again, it wasn't the stock market that attracted the most attention. Instead, bonds grabbed the spotlight as the yield on the 10-year Treasury fell under 3.90% on Thursday (6/2) — its lowest level in more than a year. The most obvious cause for the bond-buying binge was a comment from the new Dallas Fed President Richard Fisher. Fisher stated that the Fed was in the eighth inning of rate hikes — a comment that suggests the fed might nearly be finished with its rate hike campaign. This was clearly not the market's consensus opinion. But what impact could that have on stocks? There is no one single answer to that question. The market was somewhat worried that the Fed's rate hike campaign would stifle the economy or perhaps kill the housing market. Therefore, an early termination of the rate hike campaign could be construed as a market positive. However, bears will sing a different tune altogether. Market bears have been focusing on the yield curve, which is essentially a graphical representation of interest rates for bonds of different maturities. For more than a year now the yield curve has been flattening. In other words, short-term interest rates (rates on bonds with maturities ranging from a few months to three years) have been moving up faster than longer-term rates (the 10-year bond is the current benchmark). More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Fisher's comments led to an even further flattening of the yield curve last week. This raises the possibility that we'll see an inverted yield curve later this year. In other words, short-term bond yields could actually rise higher than long-term yields. The problem with inverted curves is that they often precede a recession, or at least a major economic slowdown. Adding to these issues, bears will also point to rising oil prices, slowing corporate profit growth and historically rich valuation levels in the stock market. These factors together suggest the market will remain flat to lower for the balance of the year. With all these crosscurrents at work, how do investors protect themselves? The easy answer is to play defense. In this week's "Feature Article", Paul Tracy will examine a number of defensive-oriented stocks. When the market is volatile and there's a big question mark hanging over the economy, investors tend to run for stable companies with solid earnings profiles. This shift out of aggressive stocks and into more defensive-oriented plays is often referred to as the "flight to quality". Although these stocks may not offer the fastest growth, they're often able to maintain solid earnings in even the toughest economic environments. And while there are some warning signs for the overall market, one sector that could buck the trend is the online brokerage industry. E*Trade Financial recently made a $6.2 billion unsolicited bid for Ameritrade, and now Ameritrade is in talks to buy TD Waterhouse -- the sector is a hotbed of merger and acquisition (M&A) activity. This is great news for the group -- the best in the business sport huge profit margins and very scaleable business models. Consolidation offers the best online brokers an opportunity to increase their revenues and reduce competition without adding to their cost structure. A closer look at two of Paul Tracy’s favorite online brokerage stocks. Business Overview Ameritrade Holdings is one of the largest online discount brokerage firms in the U.S. with a total of about three million accounts. The company offers a web-based online trading platform for stocks and options, as well as an enhanced trading platform for active accounts. Ameritrade also offers telephone executions for stocks, options, and bonds. Outlook and Valuation AMTD actually trades at a discount to the amount of cash it holds in the bank -- the stock trades around $15, yet the company holds nearly $19 in cash on the books. Typically, online brokerages see reduced revenues and earnings when the market is weak. By contrast, bull markets tend to attract more interest (and commissions) from retail investors and traders. As a result of this cyclicality, analysts typically low-ball growth estimates for online brokers. The proposed deal between Waterhouse and Ameritrade is another big potential positive. Because AMTD's cost structure is so much lower than the industry average, those TD Waterhouse clients should produce a great deal more profit for AMTD than they do for Waterhouse. With all of these factors in mind, Tracy believes shares of AMTD will continue to move steadily higher in the coming months and years. Business Overview E*Trade is an online financial services company. The firm's first business was online brokerage; E*Trade is one of the nation's largest online discount brokers with over three million accounts. To supplement that business and also reduce some of the volatility associated with the highly cyclical brokerage market, E*Trade has also expanded into the banking market. The company now offers a variety of consumer lending products such as mortgages and home equity loans, as well as an online banking and credit cards. Outlook and Valuation Analysts peg ET's long-term growth at over +10% — among the highest in the online brokerage business. Part of the reason is the attractiveness of its much more stable banking revenues. However, despite this impressive growth potential, the company's forward price-to-earnings multiple sits at just over 11 — ET sports a PEG ratio only slightly over 1.0. That's cheap by any measure. ET is one of the cheapest stocks on a price-to-earnings basis in the online brokerage universe. If E*Trade managed to attain a more industry-average multiple of about 15X earnings, then stock could easily trade near $15 based on projected 2005 earnings estimates of $1.00. And if costs continue to fall and the firm's E*Trade Bank platform performs well, then the stock should perform far better than most analysts expect. The StreetAuthority Market Advisor is an invaluable resource for self-directed investors. With a keen focus on fundamental analysis and an eye for undervalued stocks, editor Paul Tracy sorts through thousands of investing opportunities each week and brings you only those with the greatest potential for both near- and long-term gains. Rather than the news, the Market Advisor delivers profitable investment guidance that you can act on today to improve your own portfolio. http://at.zacks.com/?id=31. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Richard Rhodes explains that the Fed’s disparate viewpoints are starting to cause confusion. More... c) A Couple of Bullish Opportunities Dr. Edward Olmstead offers a bullish play in home improvement and one in healthcare: 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.
2. BEST OF ZACKS EQUITY RESEARCH BULL OF THE DAY POSCO - ADR (PKX) - Earnings Increase of 13% Expected. Cephalon, Inc. (CEPH) - Generic Competition Harmful. Accounting Standards Continue Shifts in Euro-Tech Food Industry Expected to Outperform S&P No News Will Be Good News
3. 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… 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 three 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-week highs. 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 an average annual return of +48.1% over the last four years compared to only +1.1% for the S&P 500. LCA-Vision Inc. (NASDAQ: LCAV) recently reported a solid first quarter in which earnings came in at 44 cents per share, 10 cents, or 29% above the consensus estimate. Strong demand for their laser vision correction procedures has prompted the company to raise its guidance going forward as well. This strong earnings momentum has made LCAV a Zacks #1 Rank stock and led to upward price movement. This company’s shares are trading very close to their 52-week high and have advanced in price by about 24% over the past four weeks. To continue your research on LCAV, click here. Layne Christens (NASDAQ: LAYN), a global leader in water well drilling, mineral exploration and diamond drill bit technology, is a Zacks #1 Rank stock. Shares of Layne Christens have gone up in price by more than 13% over the past four weeks and are trading near a 52-week high. In early June, the company announced fiscal 2006 first-quarter earnings of 21 cents per share, beating last year’s result and eclipsing the consensus estimate by over 31%. They expect strong demand for their products to continue into 2006. To continue your research on LAYN, click here. Jarden Corp. (NYSE: JAH) is a Zacks #2 Rank company. In early May, Jarden posted first-quarter earnings of 38 cents per share, surpassing last year’s 27 cents and impressively exceeding the consensus estimate by about 58%. Given such quarterly results, along with a share price increase of almost 4% in the past four weeks and a current share price that is very close to its 52-week high, this company is proving that the trend is your friend. To continue your research on JAH click here. Nicholas Financial Inc. (NASDAQ: NICK), another Zacks #1 Rank name, recently reported fiscal fourth-quarter earnings of 34 cents per share. The result topped the consensus estimate by 3% and outpaced last year’s first quarter. The company mentioned that their results were favorably impacted by an increase in the outstanding receivable portfolio, an improvement in credit quality and an interest rate environment that remains below historical levels. During the past four weeks, Nicholas Financial’s share price has increased approximately 25% and is trading at its 52-week high. To continue your research on NICK, 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 the this powerful stock picking tool. Learn more about the Research Wizard and Free Trial offer at: http://at.zacks.com/?id=1993 4. ZacksAdvisor.com TIMELY BUY of the WEEK Marvell Technology Group Ltd. (MRVL) Marvell Technology Group designs and develops analog and mixed-signal components as well as digital signal processors for the storage and networking markets. The company's goal is to provide for increased bandwidth as communication solutions evolve. It achieves this with state-of-theart chip solutions that enable data transfer in data storage devices and networking applications. Incorporated in Bermuda with U.S. headquarters in Sunnyvale, CA, MRVL designs and develops semiconductor solutions that enable consumers to store and move digital data at high speeds and low error rates. Marvell Technology operates through two segments: storage (contributing 56% of 2003 revenue) and communications (44%). Most analysts are keeping their distance from the semiconductor industry at this time, but Marvell Technology Group Ltd. appears to be bucking that trend. The company reported Q1 earnings of $0.27 per share, $0.02 better than the Zacks Estimates consensus of $0.25; revenue was $364.8 million, up from $269.6 million last year. The company is experiencing strong growth in all of its product lines, which should continue to fuel earnings growth for the foreseeable future.
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 Rank (Strong Buy) List has produced the following results for investors:
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, by visiting: http://at.zacks.com/?id=1424. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=1423. FREE PORTFOLIO TRACKER Do you believe that these events affect stock prices?
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Zacks #1 Stocks on the Move 05/17/2013
| Company Name | Symbol | %Change |
|---|---|---|
| VIASAT INC | VSAT | 19.35% |
| OLD SECOND B | OSBC | 5.76% |
| GAMCO INVEST | GBL | 4.61% |
| CORNING INC | GLW | 4.47% |
| SYNCHRONOSS | SNCR | 4.23% |
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