Thursday - October 27, 2005
 In response to subscriber requests for more timely content from Zacks.com, we are now publishing Profit from the Pros on a daily basis. Every Monday, we will feature the top articles from the previous week in a “Best of Profit from the Pros” format. On Tuesdays through Fridays, we will deliver the latest content from Zacks.com. We hope you find the new format useful and profitable. Want to view the archive of past issues? Go to: http://at.zacks.com/?id=114. Manage Profit from the Pros subscription: 1. BEST OF ZACKS EQUITY RESEARCH Quarterly earnings reports are hitting their peak, and a new Fed Chairman nominee has just been named. We thought this would be an excellent opportunity to ask a few questions of Dirk Van Dijk, Director of Research for the Zacks Equity Research group. Dirk, what is your take on the appointment of Ben Bernanke to succeed Alan Greenspan as Fed Chairman? Well I certainly hope that Bernanke does not face the same sort of hardships that Greenspan faced early in his tenure--I’m thinking specifically of the 1987 crash. I think he was sort of the consensus, solid choice, more like the appointment of John Roberts than that of Harriet Miers. He is smart, has a good background for the job, and I suspect that will generally be inclined to follow most of Greenspan's current policies. The one huge difference between Bernanke and Greenspan is that you can actually understand what Bernanke says without an interpreter. The market made terrific gains on this announcement. To what do you attribute this, specifically? The Chairmanship of the Federal Reserve is obviously a very important job, and the incumbent has iconic status. Thus there was substantial uncertainty about who would come next. Markets hate uncertainty. While Bernanke was clearly considered the front-runner, his was only one of many names which had been floated. Bush has shown a propensity to come up with surprising names, sometimes with less than top-notch qualifications, or who’s top qualification has been loyalty to him--as was the case with past nominees such as Meirs, Michael Brown, and Paul Wolfowitz. In the back of many people’s minds was the fear that he might have named a political hack to the job. The fact that he went for an obviously well qualified, conventional name, while not a surprise, was a relief to the market. Also, given a dismal few weeks, the market was pretty oversold, and the naming of Bernanke just proved to be the catalyst for a rally. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Though the S&P 500 is up year-over-year, it's been experiencing a bit of a down-trend lately. Can you tell us some of the reasons why? It's true that over the last 52 weeks the S&P is up, but most of those gains came in November and December of last year. As of the close on 10/21, the median stock in the S&P 500 was up 9.1% year-over-year. However, on a year-to-date basis, the median stock is actually down 2.2%. So aside from the post-election rally, which was probably due to the reduction in uncertainty, this year has been pretty blah for the average stock. Furthermore, the gains year-to-date have been very concentrated, with the median stock in only three of the ten S&P sectors posting gains, and only one, Energy, posting double-digit gains. As for the reasons why, clearly the major Gulf Coast storms played a role, as well as did the associated increase in energy costs. However, the reasons for higher energy costs go far beyond the weather. The rise in short-term interest rates, and the associated flattening of the yield curve have also played a role. As for the most recent downturn, I suspect that political disarray in Washington has played a role. Which sectors in the S&P 500 are performing notably well these days? Well, year-to-date the clear winner has been Energy, with the median stock up 34.1%, even after the sharp pullback of the last few weeks. All but three of the 29 stocks in the sector are up double digits. That is more than justified, since Energy is where most of the earnings growth will be this year. Even though the sector has less than 6% of the firms in the S&P 500, and less than a 10% weighting in the index, it will account for over half the total incremental earnings in the third quarter for the S&P 500--and for the year, more than a third of the incremental earnings. Even with the strong year-to-date performance, the sector has the second-lowest P/E ratio of all the sectors (the lowest is the Financial sector) based on this year’s earnings. Analysts have been consistently raising their estimates for firms in the sector all year, but especially in the past couple months since the storms hit. Furthermore, 2005 does not look like an earnings peak for the sector; earnings will be up again in 2006. Investors should treat the recent pullback in these stocks as an early Christmas present. I really think that we are only in the 4th or 5th inning of this energy bull market. If you are a conservative investor, buy some ExxonMobil (XOM) or Chevron (CVX); if you are more aggressive, buy some of the drilling firms like Nabors (NBR) or an E&P company like Chesapeake (CHK). You will know the end is near when big firms not in the industry start buying energy companies, the way U.S. Steel (X) and DuPont did at the end of the last energy bull market. Right now the fat lady is still in bed, not on stage ready to sing. The only other sectors where the median firm in the sector has posted a gain for the year are Healthcare (7.4%) and Utilities (6.8%). However, they look a little bit on the pricey side right now, with median P/Es of 19.7x and 15.4x, respectively. Are there any industries particularly suffering? If so, which ones? Well, sort of everybody else has had a mediocre year at best. Outside those three sectors, you would have been better off stuffing your money in a mattress. The Materials (down 9.6%), Telecom (down 9.5%) and Consumer Discretionary sectors have suffered the greatest median declines since the start of the year. The Telecom sector is very small, with only seven stocks in it, so there perhaps the median is less significant. However, the Materials sector has clearly been hurt by rising energy costs, particularly industries like Chemicals which use oil and natural gas as their key raw material. The Consumer Discretionary sector has been harmed by the troubles in Detroit, with the largest auto parts firm in the country becoming worthless and GM (GM) losing over $3 billion so far this year. Also, the rise in energy costs has not been good for consumer confidence. We suspect that for many retailers, it will be the Grinch coming this Christmas, not Santa. What changes should investors be on the lookout for? 2006 should be a very interesting year on the political front. The Street tends to sort of reflexively root for the GOP, (hence the big rally at the end of the year last year) which really doesn’t make a lot of sense, since actually the market does better under Democratic administrations than under Republicans. However, it really tends to do best under divided government, with the White House and Congress in different hands. If the Democrats can recapture Congress, that might set us up for a pretty good 2007. I also think that it will be important to watch out for higher inflation next year. Clearly the Fed seems focused on this and for good reason. It will continue to ratchet up short-term rates, at least for the next two meetings, and probably for a few more after that. This means that either one of two things must happen: either long-term interest rates rise, or the yield curve will invert. Rising long-term rates could let some steam out of the housing market, although I must say that housing has been remarkably resilient. An inverted yield curve is probably the best predictor of a recession out there. My best guess is that this ends up being resolved by long-term rates going up. Finally, what is your 3-6 month outlook for the S&P 500 index? Well seasonally we are entering the best time of the year, there is an old adage that says “Sell in May and go away, but remember to return in November.” Over the last 50 years or so, a strategy of just buying the S&P 500 index in November and selling it in May, and holding T-bills the rest of the year would have trounced just holding the S&P 500 the whole time. The reasons for this seem to be related to tax loss selling and then to people investing their bonuses early in the year, and then just before tax day for their IRAs, although there are probably other explanations for it. I certainly like stocks more than I like long-term bonds in here, since I’m pretty sure that long-term rates are headed upwards, and you don’t have too much of a coupon cushion. That’s different from being a raging bull on stocks, however. I suspect that we will be modestly higher six months from now--up less than 10%. I would overweight Energy very significantly, and would also overweight Tech, particularly the semiconductor area (although not Intel {INTC}). I would also underweight the Consumer Discretionary sector and the Materials sector. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - BULL OF THE DAY Orbital Sciences (ORB) - Constant Demand for Technology. For full Zacks research report, click here. Torchmark Corp. (TMK) - No Upside Catalysts. For full Zacks research report, click here.
2. 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 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 a +14.6% return versus +2.4% for the S&P 500 for the first half of 2005 (through July 15). CPFL Energia SA (NYSE: CPL) has been rising steadily throughout the year, nearly doubling in price. Part of this rise has been fueled by optimism about the company’s profits, as is evidenced by the stock’s #1 Rank. Within the past 30 days, both covering analysts have upped their full year forecasts. The current consensus estimate for 2005 earnings of $2.39 per share is 54 cents above the level of a month ago. To continue your research on CPL, click here. Iris International Inc. (NASDAQ: IRIS) will announce its third quarter results early in November. Previously, the company reported second quarter earnings of 9 cents per share, which topped the consensus by more than 28%. Over the past four weeks, the stock has soared almost 28%, and is currently trading at a new 52-week high. To continue your research on IRIS, click here. JLG Industries (NYSE: JLG), an industrial goods company, recently delivered a strong earnings report. Fiscal fourth quarter earnings were 72 cents per share, ahead of the consensus estimate by 22%. Given this positive momentum in earnings, it is not surprising that shares of JLG are trading near a new 52-week high and have advanced in price by about 11% over the past four weeks. To continue your research on JLG, click here. Standard Parking Corp. (NASDAQ: STAN), a parking management company, posted second quarter earnings of 29 cents per share in August, surpassing last year’s 24 cents and exceeding the consensus estimate by 7%. Given positive earnings momentum, a share price increase of almost 4% in the past four weeks, and a current share price that is right at its 52-week high, this company is proving that the trend is your friend. To continue your research on STAN, 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 this powerful stock picking tool. 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=1993 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Great Stocks Often Have Great Peers Kevin Matras looks at how to find winning stocks in the winningest Sectors: http://at.zacks.com/?id=1410. 3. 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… MEMC Electronic Materials (WFR) The company is the world’s only publicly traded pure-play silicon wafer manufacturer. They produce and sell silicon wafers for the semiconductor industry, and are fourth worldwide in market share. MEMC sells its products to most of the semiconductor device manufacturers. The company has nine plants that are located near the major semiconductor markets in the U.S., Europe, and Asia. The stock looks attractive to us for several reasons. Increasing solar cell demand for polysilicon is straining supply and pushing prices higher. MEMC’s internal supply should allow it to gain share in 2006 and gain price leverage when polysilicon becomes scarce. Strong demand has already driven pricing up from $25/Kg at the start of 2004 to $55-60/Kg currently on a contract basis and higher in the spot market. The solar cell market is projected to grow its demand for polysilicon by 30-40% per year for the next few years. More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - We believe that the inventory overhang that has affected the semiconductor industry seems to be easing. MEMC is a generic way to play the semiconductors without getting too product specific. They are moving more towards 300mm wafers, which have higher prices and profit margins. MEMC has its own Polysilicon plants, which could result in market share gains over those who lack their own plants. Analysts have been raising estimates and the stock is attractively valued at 14X 2006 estimates. The company has a history of beating their earnings estimates, and in some cases by huge margins. In their March 2005 quarter, they posted earnings of 34 cents per share, 9 cents ahead estimates. That is an earnings beat of 36%. With the stock trading at such cheap valuations, these kinds of numbers could contribute to multiple expansion going forward. The company met estimates of 26 cents per share for their June quarter, but this is historically a seasonally weak quarter. WFR is reporting earnings for their September quarter this week. Analysts are looking for the company to earn 29 cents per share versus 27 cents in the year ago period. The prospects are quite bullish for this company and is a good buy at this time.
4. 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 Validea Hot List had a rough couple of weeks which, of course, happens at times. Since John Reese and his team’s last newsletter two weeks ago, the Validea Hot List has fallen 4.1%, compared with a 1.1% decline in the Standard & Poor's 500. Validea Hot List stocks have declined almost across the board during this period. However, year to date, the Validea Hot List continues to handily outpace the S&P 500. The Validea Hot List is up 3.4% for the year, versus a 2.8% decline in the S&P 500. Since its inception, the Validea Hot List has gained 100.4%, compared to a gain in the S&P 500 of 17.7%. Market corrections like the one we are currently experiencing can test the patience of all investors. It is very difficult to sit back and watch portfolio values decline and at times it appears like it will never end. The truth, however, is that it will end and those who show patience and discipline will be the ones who will benefit when it does. Patience and discipline are great concepts to discuss generically, but they are much harder to follow in the real world, especially in the face of declining account balances. The reason they are so important is because the market will come back at some point - it always does. When that will happen is anyone's guess and those who try to make that guess by selling in the tough times and trying to call a market bottom almost always lose. Why is that? Because historical testing has proven that market timing is a losing game and those who sell and try to pick a bottom will often lose out on a significant rally when things turn. This is why Reese has always preached eliminating emotion from investing in this newsletter. There will be periods when Reese will look like a genius with the stock selections in this newsletter and there will be periods where it looks like he has no idea what he is doing. That is the case with even the best money managers, however, and on balance, the overall returns of the Hot List have been well in excess of the market, and that puts Reese and his team ahead of 90% of the mutual funds out there. So Reese and the team continue to stay the course and exhibit patience. That is often the most difficult thing to do, but when you have extensively studied the history of the market, as Reese has, you know it is the right thing to do. Reese applies two guru strategies to this stock. One of the gurus is James P. O'Shaughnessy Pulte Homes (NYSE: PHM) The James P. O'Shaughnessy Strategy Reese’s strategy based on the writings of James P. O'Shaughnessy looks at companies that have market capitalizations of at least $150 million. Pulte's is $9.65 billion. Pulte passes the test of having at least five years of consistent earnings growth, and its price/sales ratio is a cheap 0.74 based on trailing 12-month sales. A price/sales ratio below 1.5 coupled with consistent earnings growth suggests we have a growth stock that is still cheap. The O'Shaughnessy strategy requires that the relative strength of an investment prospect be among the top 50 of the stocks screened using the previous criteria. This test is a way of finding growth stocks that are just being embraced by the market. Pulte, whose relative strength is 84, falls in this category. U.S. Bancorp (NYSE: USB) is a financial holding company in the United States. U.S. Bancorp, the parent company of U.S. Bank, serves 13.1 million customers and operates 2,370 branch offices in 24 states. U.S. Bancorp customers also access their accounts through 4,620 U.S. Bank automated teller machines (ATMs), U.S. Bank Internet banking and telephone banking. U.S. Bancorp provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses, governments and institutions. Major lines of business provided by U.S. Bancorp through U.S. Bank and other subsidiaries include Wholesale Banking; Payment Services; Private Client, Trust and Asset Management, and Consumer Banking. On June 29, 2004, the Company purchased the remaining 50% ownership interest in EuroConex Technologies Ltd (EuroConex) from the Bank of Ireland. National City Corporation (NYSE: NCC) is a financial holding company. Its core businesses include commercial and retail banking; mortgage financing and servicing; consumer finance, and asset management. At December 31, 2004, National City was organized and managed along five major business lines, consumer and small business financial services; wholesale banking; National City Mortgage Co; national consumer finance (NCF); asset management, and Parent and other. During the fiscal year ended December 31, 2004, the Company completed the acquisition of three financial institutions: Allegiant Bancorp (Allegiant), located in St. Louis, Missouri; Provident Financial Group (Provident), based in Cincinnati, Ohio, and Wayne Bancorp (Wayne), in northeastern Ohio. In addition, the Company sold its payment processing business, National Processing, Inc., in 2004, and its bond administration business in the second quarter of 2004. Invest with the confidence of knowing that your decisions have been validated by strategies of Wall Street legends that have proven to outperform the market. The Validea Hot List contains a portfolio of stocks that pass our interpretation of the strategies of the world’s most astute investment minds, including Graham, Lynch, Zweig, Buffett and others. Validea’s extensive research has shown that when these strategies agree, the result is market beating returns and low levels of risk. http://at.zacks.com/?id=1730. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - b) An Exploration and Production Option Jack Adamo says earnings and stock prices of a select group of exploration & production will continue to rise. More... Vivian Lewis describes the battle being waged between two international drug manufacturers. Discover who is involved. More... d) Consumer Prices are Set to Rise Mutual fund expert Don Dion explains that the CPI should rise and says Wednesday’s rebound brought indices back from oversold levels. More... 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=1346. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=1353. 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, Charles Rotblut, CFA 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. | ||||||||||
- Latest News
- Most Popular
- What is the Stock Market's Achilles Heel?
- 3 Dividend Stocks at Reasonable Prices
- RTI: Are You Doing the Elon Musk Trade?
- Buy These ETFs to Profit from "Sector Rotation"
- Oil & Gas Industry Stock Outlook - May 2013
- Uncharted Territory
- 4 Ways to Short Oil with ETFs
- Options Strategies & the Zacks Rank
- This Week's Growth & Income Stocks
- AWS 5/17: The Fed: The Only Game in Town
- PFP 5/17: The ONLY Investment Story
Recent Quotes
| No Recent Quote currently available |
My Portfolio
|
My Portfolio Tracker One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts. Set yours up today. |
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% |
Quick Links
Resources
Client Support
Zacks Research is Reported On:
Zacks Investment Research
is an A+ Rated BBB
Accredited Business.
Copyright 2013 Zacks Investment Research
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1986 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1986-2011 and were examined and attested by Baker Tilly, an independent accounting firm.
Visit performance for information about the performance numbers displayed above.
NYSE and AMEX data is at least 20 minutes delayed. NASDAQ data is at least 15 minutes delayed.