Thursday - August 18, 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.
Most investors believe that success in investing stems from an in-depth understanding of purchased companies. In contrast, Jim Oberweis would argue that investment success just as often results from others’ misunderstanding. Although the difference is subtle, the later case accepts that one can still make a fine living in the absence of perfect information. To be successful, one only needs marginally better information than others, not necessarily complete certainty. On a practical level, this means Oberweis and his team would often prefer quick analysis that is 80% right over slow analysis that is 100% right. Of course, eventually they want to go back to understand the details. However, it should not be a precondition for action. Stock prices reflect aggregate market expectations; Oberweis and his team’s goal is to bet on realities that differ from those assumed by other market participants. Suppose ALL investors waited to assemble all the facts before trading. If Oberweis and his team were right 80% of the time and moved before the others, they would without question come out ahead. In reality, not everybody does wait, but enough people DO that there is often a short time lag between the release of information by small-cap companies and its full reflection in stock prices. Oberweis and his team believe that the opportunity is much smaller in more efficient areas of the market such as large-cap equities, which generally attract a larger number of investors. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - For a small-cap example, consider the release of quarterly earnings for Trident Microsystems (NASDAQ: TRID), a rapidly growing developer of chips for flat-panel liquid-crystal-display TVs. On July 28th, prior to the market open, Trident released quarterly earnings results that appeared to reflect a better-than-expected increase in revenues and earnings with a strong outlook. Shares opened for trading at $30.70, up $3.18, or 11.5% from the previous day’s close. Until about 1 p.m. central time, trading generally remained in a range of $30.00-$31.50 while investors digested Trident’s good news. In the afternoon shares accelerated upward, peaking at $33.27 before closing the day at $32.50, gaining nearly $5 or 18% on the day. While this pattern is not always prevalent, Oberweis and his team see it more often than not. At least two other factors accentuate the opportunity. First, institutional investors generally place huge orders. Even if they understand the news, they often cannot react very fast without moving the market because they are too big. A huge order exposed to the market will likely move the stock price on the basis of size alone. During that same time required to fill the order, other investors will complete their analysis and put upward pressure on the stock. The second reason is a bit more complex and pertains to human nature. In general, professional investors working for big companies are punished more for being dramatically wrong than they are rewarded for being dramatically right. As a result, most tend toward average behavior. Few seek to deliberately deviate too far from their peers. Therefore, if you were a rational analyst, you would likely be better off waiting and understanding all the facts before making a public call. The risk of making an incorrect deviant call is generally higher than the reward of being right. Accordingly, the impact of potentially good news tends to be understated in stock prices until everyone understands the facts completely. Those who can react before the facts are widely digested will profit. Of course, the other thing to consider is the other 20% — the times when a snap judgment is wrong. Fortunately, you will rarely be the last to be wrong. As long as your subsequent analysis uncovers the error before most others do, you will be able to exit without significant adverse consequences. In short, it’s hard to make money in the absence of uncertainty. Those who quickly analyze facts and draw accurate conclusions most of the time tend to be great investors. A good analyst will still learn as much as possible as news develops, but might not wait for the details before acting. As we go through earnings season, do not be afraid to act. Knowing your stocks well beforehand will give you an edge. The best approach, Oberweis and his team have found, is to move quickly while simultaneously seeking to understand the details. Current Portfolio profiles: Adams Respiratory Therapeutics, Inc. (NASDAQ: ARXT) is a specialty pharmaceutical company that currently markets two over-the-counter products under the Mucinex brand. The company expects to launch four additional products that are already approved by the U.S. Food and Drug Administration over the next two years. Mucinex has a dual-release formula that is specially made to loosen, thin out, and break up the mucus that causes congestion. The company applied in 2003 for FDA approval of their single ingredient drug which had been marketed for years without FDA approval. In October of 2003, the FDA required rival products to receive FDA approval or withdraw from the market. Later that year, all competitive products were removed from the market. Mucinex is the only lasting congestion remedy of its kind. In November of 2004, the company launched a television, print and radio advertising campaign to build awareness of the Mucinex brand in the consumer market. Adams completed its initial public offering (IPO) of 6.9 million shares on 7/21/05 at $17 per share. Selling shareholders sold an additional 2.25 million shares. For the nine months ended March 31, 2005, sales increased approximately 146% to $121.0 million from $49.0 million in the same period of last year. Income before taxes for the nine months ended March 31, 2005 increased approximately 108% to $39.6 million from $19.0 million in the same period of last year. Adeza Biomedical Corp. (NASDAQ: ADZA) develops women’s health products that help predict premature births for women at risk for preterm birth and assess infertility in women with fertility issues. The company’s principal product is a patented diagnostic test – the Fetal Fibronectin Test – which detects the presence of fetal fibronectin in vaginal secretions during pregnancy. The test helps doctors predict the possibility of premature birth and can help improve the chances of the baby’s survival. The test itself utilizes a single-use, disposable cassette and is analyzed on Adeza’s patented system. Adeza also markets the E-tegrity Test, an infertility test that assesses the receptivity of the uterus to embryo implantation. In the company’s latest reported second quarter, sales increased approximately 33% to $9.6 million from $7.2 million in the second quarter of 2004. Adeza reported earnings per share of $.08 in the latest reported second quarter versus $.05 in the same quarter of last year. Adeza completed their initial public offering (IPO) of 3.75 million shares on 12/10/04 at $16 per share. The Oberweis Report is a proprietary investment advisory letter specializing in stocks of extraordinarily rapidly growing companies. Each issue contains new stock recommendations along with a review of those previously recommended stocks that have yet to be sold. Learn more about this newsletter and free trial offer at: http://at.zacks.com/?id=438. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - b) Be Selective Paul Tracy explains that the key to profiting in today’s market is to make picks that can buck the broader averages’ malaise. More... Norton and Gillespie explain that the S&P 500 is set to report another quarter of double-digit year-over-year growth in operating earnings. More... Gregory Spear says the large-caps are doing the lifting and provides insight on where oil may be headed. More... Dennis Slothower explains why an intermediate down turn in the stock market is very real. 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 New Century Financial (NEW) - Expect Increased Dividend. Nexstar Broadcasting (NXST) - Poor Second Quarter. ADR Banks Seek New Growth Positive Signs for Second Half ... So Far
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… Two of the most commonly accepted measures of a value stock are a price-to-earnings (P/E) multiple of 15.0 and a price-to-book (P/B) multiple of 3.0. Although many studies have shown performance advantages to investing in value stocks, not all value stocks are actually bargains. A value a stock is only a good buy if earnings are expected to improve in the future. High Rank Value is a strategy designed to find the true bargains among value stocks. By requiring a Zacks Rank of #1 ("Strong Buy") or #2 ("Buy"), this strategy restricts the pool of value stocks to only those with positive revisions in earnings estimates. In other words, profits are expected to improve in the future at a faster pace than originally anticipated. The combination of a low valuation and a high Zacks Rank is very profitable. This Profit Track has consistently topped the S&P 500 during the past 4-1/2 years. In 2004, this strategy generated a return of +28.3%. During the first six months of 2005 (through June 17), this strategy has returned +6.3%. Commerce Group, Inc. (NYSE: CGI) is engaged in providing personal and commercial property and casualty insurance. This Zacks #1 Rank (Strong Buy) stock is an attractive value as evidenced by its price-to-earnings (P/E) multiple of 9.01 and price-to-book (P/B) multiple of 1.66. The company also recently reported an improvement in earnings for the second quarter when compared to the earnings result of the year prior. To continue your research on CGI, click here. Equity Inns, Inc. (NYSE: ENN), which is in the business of acquiring equity interests in hotel properties, recently announced second-quarter adjusted funds from operations (AFFO) of 34 cents per share, surpassing last year’s 27 cents and exceeding the consensus estimate by almost 10%. The company mentioned that it continues to outperform the industry. ENN’s price-to-earnings (P/E) multiple is 12.32, while its price-to-book (P/B) multiple is 2.04. To continue your research on ENN, click here. Marathon Oil Corp. (NYSE: MRO), another Zacks #1 Rank (Strong Buy) company, recently posted second-quarter adjusted earnings of $2.16 per share, jumping ahead of the consensus estimate by about 41% and outperforming last year’s result. The company said that while it continued to realize the benefits of high commodity prices and margins throughout the quarter, its results were also positively impacted by the strong operating performance of each of its businesses. MRO can be quite a bargain with its price-to-earnings (P/E) multiple of 11.93 and price-to-book (P/B) multiple of 2.18. To continue your research on MRO, click here. Old Republic International Corp. (NYSE: ORI) is another bargain candidate that sports a price-to-earnings (P/E) multiple of 10.17 and price-to-book (P/B) multiple of 1.2. In late July, the company released second-quarter earnings of 89 cents per share, eclipsing last year’s 63 cents and exceeding the consensus estimate by nearly 44%. ORI’s revenues increased from the year ago total of $867.1 million to $944.9 million for this year’s second quarter. To continue your research on ORI, 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… Blue Coat Systems, Inc. (BCSI) Blue Coat Systems’ proxy appliances provide control of web communications to address business risks such as inappropriate web surfing and viruses brought in via instant messaging. Their ProxyAV solution is in very high demand. Originally founded as CacheFlow, Inc. in 1996, the company renamed itself as Blue Coat Systems, Inc. The company raised $130 million when it went public on November 19, 1999, and is headquartered in Sunnyvale, California. Blue Coat sells appliances through an indirect fulfill channel to customers worldwide. The company has over 20,000 appliances shipped to more than 2500 customers in all key verticals. The company recently reported the best quarter in its history. Fiscal first-quarter earnings came in at 27 cents per share, six cents ahead of the consensus estimate, and well ahead of last year's 17 cents. BCSI experienced strength across all products and markets, aided by increased sales and marketing capacity. Their flagship ProxyAV solution was widely adopted by customers. The company's balance sheet is very strong, with cash balances at $55.2 million, combined with no debt. BCSI duplicated last quarters performance with another 300 new customers added during the quarter. BCSI continues to add to its sales & marketing organization by increasing sales teams by six to 43 and the company plans to add approximately six teams in Q2FY06. Management indicated that while it will continue to invest in the business, the company plans to grow operating expenditures at a slower rate than revenues. DSO’s increased three days to 40 and inventory remained relatively constant at $337k. Deferred revenue increased by $4.7M to $21.6M, with deferred revenue approximately made up of 50% service and 50% product. The stock is currently trading at 24.6x the newly revised 2007 estimate of $1.50 per share. Even after the recent run-up, this is below the long-term growth rate of 24.7%. Earnings momentum is extremely strong at this company as evidenced by the last two quarters, in which BCSI exceeded estimates and guided higher as well. This stock is still relatively unknown on Wall Street, which leaves plenty of room for upside as more investors learn about their success.
5. WEEKLY COMMENTARY: Zacks Industry Outlook “We believe that in a rising interest rate environment, which implies improving economic growth for the most part, real estate services companies should provide outstanding returns for investors,” wrote Zacks Equity Research analyst Rob Van Bergen in a research report. “While asset owners should see some contraction in multiples, any pick-up in economic activity generally helps companies.” Real Estate Operations and Real Estate Development are the two best-positioned sectors of this industry, according to Nick Raich’s “Weekly Earnings and Sector Update.” These two spaces have a Zacks Industry Rank of 2.59 and 2.60 respectively, placing them 25th and 26th out of more than 200 industries. Companies in these areas provide a wide range of services, such as financial planning, site acquisition, constriction bidding and management, among many others. The services that these companies offer are among the most likely in this large industry to react favorably in a rising interest rate environment. Rising interest rates aren’t considered much of a positive for real estate, but does signal an improving economic situation. That could be good news for services such as asset management and leasing. Furthermore, although the Fed has raised rates for ten consecutive meetings, they are still at historically low standards. The publicly-traded real estate industry, which is dominated by real estate investment trusts (REITs), is at an interesting point. The combination of low but rising interest rates, high multiples, and negative to stabilizing operating results should make for a relative flat trading market for REIT shares. Van Bergen wrote that with operating results stabilizing, funds from operations (FFO) should expand. Although he does not expect the stronger earnings to translate into higher valuations, he does believe investors will benefit from positive trends in dividends. On average, dividends currently yield about 5% over the sector. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - SCREEN OF THE WEEK Kevin Matras looks at cash flows (and increasing cash flows) for a winning stock picking strategy: 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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