Thursday - July 21, 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.
Institutional investors’ demand for stocks – and risky corporate bonds – continues. Charles Norton and Allen Gillespie first pointed out their reinvigorated interest for stocks in their May 1 issue, and it has gone pretty much unabated, even in the face of rising oil prices and terrorism. Of course, there has been sporadic distribution, but a periodic down day on increased volume is normal, even in a rising market. For the most part, though, the price and volume action indicates that the big money is still accumulating stocks. At the same time, the tone of the corporate bond market seems to improve daily. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Junk bond spreads, for example, are now at their tightest level in months and have already recouped half of the move since they began widening in March after GM’s dismal earnings outlook. This means that corporate bond investors are requiring less yield to bear the greater risk of high yield bonds, relative to risk-free government bonds. So long as this trend lasts, the debt-funded corporate buyback and M&A activity that has supported stocks is likely to continue. So where’s the money flowing? Leading sectors right now include oil, retail, real estate, and health care, Norton and Gillespie have been actively adding companies to their model portfolio that hail from top performing industry groups within these areas. In this issue, Norton and Gillespie share their insights on two such companies. One of which is Syneron Medical (NASDAQ: ELOS), whose proprietary technology is a big innovation in the fast-growing aesthetic medical market. The company has already managed to generate some handsome profits in areas that appeal to our vanity: hair removal, wrinkle reduction, and skin rejuvenation. The recently-approved VelaSmooth product for cellulite is sure to be a homerun, and the next generation technology is even more exciting. Syneron has a healthy track record of strong sales and earnings growth. For the past eight quarters Syneron has generated year-over-year sales growth of 47% or greater. Most recently, first quarter sales jumped 53% from prior year levels. Earnings have been just as impressive, with triple-digit growth in seven of the last eight quarters. For the year, earnings are expected to be up 24% in 2005 and 26% in 2006. It’s Syneron’s lush margins that allow the top line growth to trickle down to the bottom line. The company’s gross margin and net profit margin are well above the industry average. In addition, return on equity is a robust 51%. Syneron leads the medical systems and equipment industry crowd, which, as of this writing, is in the top 20% of all industry groups. Institutional investors are accumulating stock, and the roster of shareholders includes some savvy firms such as Nicholas Applegate Capital Management. Still, relatively few have noticed this young company and institutional sponsorship will likely grow in coming quarters. Using a relative valuation approach, comparing Syneron’s valuation to the average of a five-company subset of firms focused on aesthetics, yields mixed results. For example, Syneron’s estimated long-term earnings growth rate of 24% is below the average of 30%, but so is its earnings multiple. In other words, Syneron’s P/E is 1.16 times its earnings growth rate, attractive compared to the average of 1.23. However, Syneron’s price/sales multiple of a whopping 9.8 times is expensive both on an absolute basis, and when compared to the average of its peers at 6.1 times. Syneron came public last August and quickly surged over 220% during its first four months as a publicly-traded firm. From November 2004 through June 2005, the stock rested, building an eight-month base. The stock is now testing its November 2004 highs as volume picks up. The best entry would be on a low-volume pullback to its June high of $37.15, although a partial position is possible at current levels. Summary Syneron’s proprietary ELOS technology is a big innovation in the fast-growing aesthetic medical market. The company has already managed to generate some handsome profits in areas that appeal to our vanity: hair removal, wrinkle reduction, and skin rejuvenation. The recently-approved VelaSmooth product for cellulite is sure to be a homerun, and the next generation technology – non-invasive liposuction – is truly the holy grail. In short, Syneron is making fat profits making people look thinner. Supernova Stocks is an independent investment newsletter advisory that is committed to finding the most fundamentally superior and technically sound stocks that have the greatest growth prospects. Supernova Stocks focuses on the very best companies in top performing industry groups that have some institutional sponsorship, but are largely under-owned. Supernova Stocks is led by Charles Norton, CFA, a professional asset manager. Learn more about this newsletter and free trial offer at: http://at.zacks.com/?id=1974. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dan Sullivan says the market continues to rally impressively. Read his analysis and get some stock highlights. More... c) Fun in the Sun with Biotechs Nadine Wong thinks initial biotech buying interest will be in the larger-cap names with products and earnings. More... Richard Rhodes suggests investors reassess their risk profile going into this earnings season, and also highlights some stocks. More... Jeff Carter expects the choppy trading range action to continue. Learn about a pair of option trades. More... f) Change in Market Leadership Dennis Slothower says the weakness in crude oil is why the OTC has suddenly assumed market leadership again. 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 Intevac, Inc. (IVAC) - Dominating Its Market. Regions Financial (RF) - Lack of Earnings Asset Growth. Valuations Attractive in Europe Building Products Continue Upswing Busy Week for Earnings
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 strategy uses the PEG Ratio to find attractively priced stocks poised for price appreciation. The PEG Ratio is simply the P/E (Price divided by Earnings) of a stock divided by its 5-year projected growth rate. Too often investors think of value investing being the antithesis of growth investing. The beauty of using PEG is that you can find value stocks even amongst hot growth stocks. If you like to use a company’s PE ratio to determine its value, you’ll love using the PEG ratio. Find out which companies offer the greatest value regardless of growth rate to enjoy stellar returns. Value investing may be boring to some, but a +114.4% return in 2003 and +38.4% return in 2004 may create many converts to this Profit Track. Beazer Homes USA, Inc. (NYSE: BZH) a Zacks #1 Rank (Strong Buy) company, has a PEG ratio of .55. The company will announce fiscal third-quarter earnings on July 28, 2005. In late April, BZH posted fiscal second-quarter earnings, excluding items, of $1.82 per share, exceeding the consensus estimate by about 44% and improving on last year’s result. Revenues in the quarter increased 11% and new orders were up 4%. The company said such results indicate continued strength and favorable conditions in the housing industry, as well as Beazer Homes' strong market position. To continue your research on BZH, click here. Hovnanian Enterprises, Inc. (NYSE: HOV) is another Zacks #1 Rank (Strong Buy), which has a PEG ratio of .44. The company recently announced that the dollar value of net contracts, including unconsolidated joint ventures, rose 29.7% in June, while the number of net contracts increased 12.2% compared with June 2004. In late May, HOV reported fiscal second-quarter earnings of $1.62 per share, improving on last year’s $1.06 and edging past the consensus estimate by a penny. The company said its record results during the fiscal 2005 second quarter were fueled by its leading market positions, its increased geographic diversity, continued pricing power in many of its markets, and further market penetration through its broad product offerings. To continue your research on HOV, click here. Oil States International, Inc. (NYSE: OIS) released first-quarter earnings of 50 cents per share in late April, outpacing last year’s 32 cents and eclipsing the consensus estimate by almost 22%. The company said its record first quarter was due to strong activity in many of its key markets as well as the benefits of its recent strategic capital spending and acquisition programs. This Zacks #1 Rank (Strong Buy) company has a PEG Ratio of .48, suggesting that it is an attractive value for investors. OIS will report second-quarter financial results on August 1, 2005. To continue your research on OIS, click here. Scottish RE Group Ltd. (NYSE: SCT) rounds off this list of Zacks #1 Rank (Strong Buy) companies. The global life reinsurance specialist announced first-quarter net operating earnings of 60 cents per share, beating last year’s 45 cents. SCT, which sports a PEG Ratio of .52, noted that the strong showing for the first quarter was driven, in large part, by the performance of its traditional life reinsurance business in the United States and the contribution of the ING acquisition. The company’s second quarter results are scheduled for August 4th. To continue your research on SCT, 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 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… Resources Connection, Inc., (RECN) Resources Connection, Inc. (NASDAQ: RECN) provides outsourced professional services on a project basis to firms of varying sizes in a broad range of industries worldwide. The company’s primary areas of expertise include: accounting and finance, information technology, human resources, risk management and internal audit, and supply chain management. The company also assists clients with periodic needs, such as budgeting and forecasting, audit preparation, public reporting, and assisting clients with their compliance efforts under the Sarbanes-Oxley Act of 2002. The company, founded in 1996 as a division of Deloitte & Touche, became a wholly-owned subsidiary of Deloitte in January 1997. Resources Connection completed its initial public offering in December 2000, following a management-led buyout in April 1999. We believe RECN will be one of the chief beneficiaries of the permanent shift in corporate demand for internal audit personnel. Although we anticipate demand for Sarbanes-Oxley 404-related projects to slow in 2H of calendar ‘05 and some degree of quarterly volatility, we believe there will be a large amount of other regulatory- and economically- driven project work that should offset declining Sarbox revenues. Investors should not assume that this transition occurs seamlessly, however we are very optimistic regarding the long-term opportunities in A&F staffing. RECN released an outstanding earnings report for their fiscal 2005 fourth quarter. Earnings per share came in at $0.31, $0.03 ahead of the consensus and well above last year’s results of $0.22. There were concerns that demand for Sarbanes-Oxley related work was slowing, but this quarter should put those fears to rest. RECN’s stock was selling off pretty hard on these concerns before this earnings release, and it is evident by the huge post-release percentage gain that these fears were misplaced. Even if demand for this type of work slows, the company is still forecasting 20% revenue growth in fiscal 2006. The key to further revenue growth is to expand relationships with their existing client base, and RECN has done a great job of that. Their top 50 clients accounted for about 40% of their total revenues in the fourth quarter. Building stronger ties with these companies could accelerate their revenue growth rate going forward. They are building a reputation as a solid company in their field and should garner more business as a result. The stock is attractively valued, even after the recent run-up, at 23x 2006 estimates of $1.24 per share. This price-to-earnings ratio is about even with their long term growth rate of 23.67%. Buying this stock at a PEG ratio of 1 or lower will likely be a very wise move.
5. WEEKLY COMMENTARY: Zacks Industry Outlook Given its position as the world's leading chipmaker and, therefore, a major bellwether for the industry, Intel Corporation's recent quarterly report was of major interest. The market found enough wrong in the report to pull the stock, and the tech arena in general, lower following the announcement. However, the second quarter performance was solid overall and underscores encouraging signs for the second half. Earnings per share rose 22% to 33 cents, which also topped the consensus by a penny, while revenue advanced 15% year-over-year to $9.2 billion. "Our investments in new products, advanced silicon capacity and emerging markets are paying off with growth that is outpacing the industry," said Paul Otellini, Intel President and CEO. "We look forward to the second half of 2005 as we ramp dual-core microprocessors into high volume, begin production on our 65nm process technology, and deliver innovative new platforms." The Semiconductor Industry Association echoes the second-half optimism. According to its forecast for 2004-2007, the association sees sales rising 6% to $227 billion in 2005. Furthermore, the forecast projects that sales will grow at a compound annual growth rate of 9.8% to $309 billion in 2008. Furthermore, Eshoo believes there is a fundamental shift in semiconductors from corporate IT to consumer demand. "This proportion will continue to grow in the years ahead, as consumer all over the world are captivated by the richness and portability of digital media," he said. "The changing nature of customers will affect every aspect of the business, from product design to marketing and demand forecasting." With the industry gaining momentum for the second half, the semiconductor space looks poised to rise even further on Raich's list in the coming weeks and months. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - SCREEN OF THE WEEK Increasing Sales and Increasing Profit Margins Kevin Matras looks at Sales Growth and Increasing Profit Margins. A powerful combination for big returns. http://at.zacks.com/?id=1410. 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?
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, Stephen Reitmeister 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. 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 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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