Wednesday - July 13, 2005
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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.
A crisis has been developing in the oil market since the beginning of the year as prices have climbed over 30%, and this rally is feeding on itself. Perception is often more powerful than reality and the perception that we have a shortage is driving prices higher. This in turn puts fear into traders that we do not have a large enough gasoline reserve, which fuels even higher prices.
Global economic expansion, especially in China, is driving what the International Energy Agency says is the biggest increase in oil demand in 24 years. China, with its cheap labor, is in the process of capitalistic development, and business is booming. With the Chinese yuan pegged to the dollar and our soaring trade deficit with China, oil is needed more than ever to propel China’s economic expansion.
Our politicians have been asleep at the switch. The United States hasn’t built an oil refinery since 1976. The latest rise in oil prices has come about because of a growing concern about U.S. refiners’ ability to make enough fuel for an expanding U.S. petroleum market. Didn’t we learn anything from the 1973 OPEC oil embargo? Our actions tell Slothower we didn’t.
Low U.S. gasoline stocks and pressure on U.S. refiners to increase production of new gasoline blends have also helped drive world crude oil prices higher. Environmental regulations demand new grades of gasoline but vary from state to state, which requires building processing facilities to serve so many different markets. That costs money — lots of it. Even if one were able to raise the money, environmental concerns can make getting the necessary clearance extremely difficult.
Refiners are now struggling to meet demand and are competing with each other, and with China, to secure supplies of the high-quality, light, sweet crude needed for new gasoline blends. Even President Bush has cited tight U.S. refining capacity as the force behind record prices. He proposes allowing refiners to build refineries on closed U.S. military bases, which sounds like a good idea to Slothower but in the short-term is not going to help us.
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With refiners’ ability constricted, any minor refinery glitch produces a rather large price impact. The market believes the refining situation is so tight that any capacity losses anywhere can cause a ripple effect across the nation. In the meantime, the oil market is in a bullish feeding frenzy and it seems to be getting worse. That is why Slothower projects that crude oil prices will keep rising until an economic crisis, like a recession, rears its head.
Only when it is certain that a major global contraction is unavoidable will crude oil speculators be convinced that the demand for oil is about to fall sharply. As long as there is the belief that oil inventories are tight and the demand for oil is strong, prices will keep rising. The price that will restrict economic growth is about $85–$90 oil per barrel. Slothower sure hopes we don’t get there, but he doesn’t want you to stick your head in the sand and rule it out.
SPIRIT FINANCE (NYSE: SFC) operates as a self-managed and self-advised real estate investment trust (REIT). It specializes in customizing financial solutions for companies who own or operate single-tenant retail and distribution facilities with financing needs in excess of $25 million. The company’s real estate financing solutions take the form of sale-leaseback transactions and mortgage loans. To a limited extent, these solutions also include construction, equipment, and corporate loans.
SOURCE INTERLINK COMPANIES (NYSE: SORC) provides supply chain management and other related products and services to national/regional retailers, magazine publishers and other providers of home entertainment content primarily in the United States and Canada. It operates in three segments: Magazine Fulfillment, Compact Disk (CD) and Digital Versatile Disk (DVD) Fulfillment, and In-Store Services. The Magazine Fulfillment segment engages in the sale and distribution of magazines, including domestic and foreign titles, to specialty retailers and wholesalers.
During my 25-year career as a money manager, I’ve tested hundreds of market indicators. I’ve fine-tuned my strategy using specific indicators that work together to predict the market with incredible accuracy and find stocks flying under the radar screen. Indicators are pointing to a strong bull market in 2005. I don’t want you to miss a single day of what I’m convinced will be a spectacular bull market. Learn more about this newsletter and free trial offer at : http://at.zacks.com/?id=1489.
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Spear explains that understanding three simple moving averages can keep you on the right side of the strongest trends. More...
Dr. Olmstead explains that the equity markets are experiencing a volatility vacuum. More...
Steve McKee says investors should look at what’s ignored for steady low risk/high reward situations. More...
Donald Rowe forecasts a 35% move between now and May of 2006, but there are still risks. 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=1386.
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 at: http://at.zacks.com/?id=1388.
’How’ to Create Winning Screens
Each week in this article, I usually go over a unique way to screen for stocks or I’ll publish a proven, profitable screening strategy.
But is this week’s article, I wanted to go beyond that and talk a bit about ‘how’ I’m able to do this.
For instance, in many of my winningest strategies, I’ll routinely create my own custom expressions. Simply put, I’ll compare one item to another or I’ll combine different items together or I’ll even compare an item’s value to its value from a different time period (or periods).
It’s quite easy to do in the Research Wizard.
But most programs just can’t do this. Either they don’t have the customization capability or they don’t have the historical data.
This kind of flexibility, allows me to extract greater meaning from my screening items.
For example; If you read that XYZQ stock (fictitious stock symbol), had a P/E ratio of 40, you would probably have this idea in your mind that it’s ‘over-valued’ or that it’s trading at too many times its earnings.
But what if you read that its 40 P/E was actually lower than the average for its industry and that it was actually below its own historical norm. That might cause you to look at it entirely differently, wouldn’t it?
Even something as mundane as an average broker rating is given greater meaning.
If an average broker rating of a stock is 2, you may think, ‘great’.
But what if you saw it steadily eroding from a 1, to a 1.2, to a 1.6, to a 1.8 and now to a 2?
You now have a more complete picture.
Yes, it’s a 2. But why did it go from a 1 to a 2 over the last few weeks? This can be important stuff.
And if you had an opportunity to pick the perfect stock, wouldn’t you rather have a stock that’s getting ‘better’ rather than getting ‘worse’?
This is what I’m talking about.
I don’t mean for this week’s article to sound too much like an advertisement for the Research Wizard, but I always try to convey something important in this column.
And as I was going over my screens this weekend (as I always do), I realized that almost all of the strategies that I rely on, could not be done in any other program other than the Research Wizard.
Even something as ‘simple’ as insuring that you always only get a certain number of stocks in your screen/portfolio each period. That may seem like no big deal, but what if you only had a certain amount of money in your stock account, and your desire was to trade an equal dollar weighted portfolio of five stocks each month. Our ‘limiting’ operators, make this possible.
But if your strategy routinely produces more than five stocks each period, and you simply can’t facilitate more than five stocks in your account at a time, what good is a ‘more-than-five-stock’ strategy going to do you?
So this week, instead of writing about a powerful screening strategy, I decided to write about the powerful program that makes my powerful screening strategies possible. (And yours too.)
But to make sure I don’t disappoint, here’s five stocks taken from some of my winningest screening strategies (for Mon., 7/11/05):
(Of course, you can get them all by trying the Research Wizard.)
But remember one of the keys to successful screening (aside from having a powerful screener), is in discovering those screens that have produced profitable results in the past. And that’s exactly what you get with the powerful Screening and Backtesting ability of Research Wizard. Try it out for yourself. Go to: http://at.zacks.com/?id=1388.
All the Screen of the Week strategies are created and back-tested using the Research Wizard software from Zacks Investment Research. Learn more about the Research Wizard free trial offer and our new special report “Top 10 Stock Screening Strategies” at: http://at.zacks.com/?id=1389.
Discover all the Free Screening Tools on Zacks.com at: http://at.zacks.com/?id=1389.
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. BEST OF ZACKS EQUITY RESEARCH
BULL OF THE DAY
VeriSign, Inc. (VRSN) - Strong Sales Growth.
Ultrapar P.A. - ADR (UGP) - Brazilian Turbulence.
Semiconductors Revised Upwards
Lodging and Travel Meet Expectations
Second Quarter is Front and Center
4. 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 Growth and Income Strategy is pretty straightforward, yet amazingly profitable. The goal is to find solid companies paying out extraordinary dividends. With money market rates being so low, we think many investors will find appeal in this strategy with minimum dividend yield of 8% plus attractive equity appreciation potential. This screen has the least turnover of any of the Profit Tracks and has shown excellent results with both 12 and 24 week holding periods. We know there are those of you who may be worried about too much REIT exposure in this type of strategy. The good news is that we have also backtested this strategy by removing REIT stocks and the results were still outstanding.
This Profit Track looks for stocks that are paying dividend yields of greater than 8% along with other attractive fundamental attributes. Although this a longer term and less risky screen, it has still beaten the S&P 500 every year including +49.2% in 2003 and +19.5% in 2004 (YTD, thru 12/3/04).
General Maritime Corporation (NYSE: GMR), a leading provider of international seaborne crude oil transportation services within the Atlantic basin, is currently yielding 15.64%. In its first-quarter report, which was issued in late April, the company declared its first dividend of $1.77 per share, representing an important milestone in its history. GMR stated that it was pleased to have rewarded its shareholders with a sizeable cash dividend while preserving its ability to both grow and renew its fleet. To continue your research on GMR, click here.
Impac Mortgage Holdings (NYSE: IMH) recently declared a second-quarter dividend of 75 cents per share. The company said it continues to experience strong mortgage acquisitions and originations and solid asset growth to $27.0 billion. IMH did add, though, that market conditions have resulted in industry wide unprecedented prepayments speeds and compression of the company’s adjusted net interest margins. Yet another positive for this mortgage real estate investment trust is its current dividend yield of 16.53%. To continue your research on IMH, click here.
MCG Capital Corporation (NASDAQ: MCGC) provides financing and advisory services to a variety of small-and medium-sized companies throughout the U.S. with a focus on growth-oriented companies. The company declared its second-quarter dividend of 42 cents per share in early May. MCG Capital Corporation meets the criteria of this profit track with a favorable yield of 9.60%. To continue your research on MCGC, click here.
Southern Peru Copper Corp. (NYSE: PCU) with a healthy yield of 20.72%, pays out a much higher dividend than the average stock on the S&P 500. PCU, one of Peru's largest companies and one of the ten largest copper producers worldwide, announced the payment of a dividend of $2.3776 per share on April 12, 2005. Later that month, the company posted first-quarter earnings of $2.34 per share, outperforming last year’s $1.09 and beating the consensus estimate by one penny. To continue your research on PCU, 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
5. ZACKS TOOLBOX
Zacks.com is first and foremost a free resource to help you make more profitable stock picks. In this space each week, we will provide insights into various tools and data points provided on Zacks.com and how to use them to improve your portfolio's performance.
Every three months the entire investment community enters the hallowed grounds of Earnings Season. Which companies will exceed expectations and reward shareholders? And which stocks implode under the weight of their earnings disappointments? And is there any way to know which is which before it happens? When you consider that earnings are the #1 determinant of stock prices, then you understand why this is the most important time of the year to pay attention to news on your stocks.
One of the true strengths of Zacks.com is our coverage of all things earnings related. Here are some of the free tools that you can use from the site to stay on earnings announcements for the stocks that matter to you.
Earnings Report Date: When are your companies reporting their earnings? And what is the EPS estimate? Two ways to find out.
1) Full Company Report: Example: Here is the report for GE at: http://at.zacks.com/?id=1504. You will find "The Next EPS Date" about 1/3 of the way down the page. Plus the estimated earnings are further down in the EPS information section.
2) Earnings Calendar: This can be found on the Earnings home page at: http://at.zacks.com/?id=1549. Click on any date to see the companies expected to report that day along with EPS estimate.
How to Spot Potential Earnings Disappointments: There is no sure fire way to spot stocks that will fail during earnings season. However, there are ways to improve your odds. In general, stocks that have disappointed in past quarters are more likely to disappoint in future quarters. Plus stocks that have seen lower expectations leading up to their announcement date also tend to fall short of the mark more often. The clues to both of these items can be found on the "Estimates" research report. Here is the link to see that page for GE and you can go from there to research any of your stocks http://at.zacks.com/?id=1504.
How to Spot Potential Earnings Surprises: This is the inverse story from above. Those stocks that have reported positive surprises in the past are more likely to do so in the future. In addition, earnings estimate increases leading into earnings season is a very good indication as well. However, the simplest way to find these winners is by following the Zacks Rank which concentrates on these same variables. You can either look at the full list of Zacks #1 Rank stocks at: http://at.zacks.com/?id=1551 or screen for Zacks #1 Rank stocks with the highest past earnings surprises through our custom screener at: http://at.zacks.com/?id=1535.
Daily Email Updates: Certainly you can come to Zacks.com everyday to track down important earnings updates or you can have the information sent to you every day via email. When you set up a free portfolio tracker on Zacks.com, it also qualifies you to receive our Daily Email Updates that provide all key changes to the stocks you are following including, estimate revisions, upcoming earnings dates, actual earnings reports, broker recommendation changes and the Zacks Rank. To start Daily Email Updates go to: http://at.zacks.com/?id=1550.
Earnings Home Page: This is where we have consolidated all of our earnings resources to help investors stay on top of earnings season. Beyond the tools noted above you will also find Earnings headlines and EPS Surprises updated in real-time. Bookmark this page and tune in every day during earning season to find which losers to cut and which stocks are showing breakthrough results. The Earnings Home Page is part of our Research section of the site at: http://at.zacks.com/?id=1549.
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, by visiting: http://at.zacks.com/?id=75.
Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=72.
FREE PORTFOLIO TRACKER
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*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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