Wednesday - November 16, 2005
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2319. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH As third quarter earnings season winds to a close with a couple of the biggest IT companies issuing slightly disappointing earnings reports, we wanted to speak to senior analyst Steve Biggs, CFA about what this means, and how IT stands to fare during the upcoming holiday season. Steve, what are the big issues in IT these days? Well, the biggest thing is that two major IT companies – Dell (DELL) and Cisco Systems (CSCO) – reported quarterly earnings recently, both of which were a little disappointing. Actually, Dell did not officially disappoint; they had pre-announced lower earnings a couple weeks ago. But Dell’s guidance was still pretty weak. There are definite concerns over things slowing down within the industry. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - For the first time in awhile, consumer sales have been weak. They had been driving the overall market since about 2001, with enterprise sales picking up a bit over the past year or so. Enterprise growth is still OK in North America, but Europe is slowing down across the board, with a more-pronounced slowdown in the U.K. market. Dell only does 20% of its business in Europe, but Cisco’s exposure there is higher, and they have higher enterprise exposure, too. On the other hand, Cisco doesn’t have the consumer exposure Dell has. How much are the earnings reports for these two major companies affecting the overall industry? Actually, IT has proven to be pretty directionless. One day, there will be good news for some niche companies who do business in a relatively small segment of the industry, and the next day we’ll see disappointing results from a different company, and the market goes back down. There have been no clear trends lately. Of course, when a big company like Dell pre-announces lower earnings, that’s a negative. But then again, the NASDAQ seems to have come up a bit, and is basically where it was a month or two ago, so it seems people are not too concerned about this right now. The industry seems to do a bit better over the holiday season, at least on the consumer side. What’s the forecast this year? Well, as I mentioned, consumer sales have been struggling as of late, but you’re right – the holiday season usually is a better time for IT companies. It really depends on product category. With Dell, they are seeing consumers drifting toward lower-priced products; there is no real high-end offering this year to get consumers excited. But Apple (AAPL) should do quite well with their brand new iPod Nano, which is a Flash-based iPod the size of two credit cards. It’s four gigabytes, so it can hold about two full days of music. Only Apple has this, so they should do pretty well with it. Otherwise, the gaming market is heating up a bit with new products coming out: Microsoft’s (MSFT) Xbox 360 and Sony’s (SNE) PlayStation 3 should definitely drive sales. Another beneficiary this quarter might be NVIDIA (NVDA) with its graphic chip business, as well as a decent number of software and video game developers. Do you see any new developments in M&A? There was a relatively new deal: SunGard Data Systems has been taken private, along with a couple other companies in the computer services industry. This is a source of a lot of speculation that investment companies – or, at least, companies backed by an investment firm – taking computer service firms private may develop into a trend. It’s basically the same principle as what used to be called a leveraged buy-out, though they’re not called that anymore, as there’s not as much leverage. Electronic Data Systems (EDS) is selling a chunk of its business to a venture capital fund. But these types of deals are pretty specific to the computer services industry. What Buys or Sells would you recommend for us today? Plexus (PLXS) is one of my recent Buys. PLXS is a contract manufacturer, or EMS company, which gets manufacturing outsourced to them. They are big in communications equipment development, which is an area coming back after falling off during the earlier part of this decade. It has exposure to companies like Juniper (JNPR), which is a rapidly growing communications equipment provider. Plexus is also growing in the medical sector, which is new for them. The company beat estimates for this last quarter, and it seems to be continuing in the right direction. I have a Sell on Cray (CRAY), but I don’t mean to infer that this is a stock one should short-sell. Basically, I recommend staying away from certain companies when they’re struggling. In Cray’s case, they may wind up being alright, but they also may run out of cash, which obviously means there’s lots of risk to the shares. What do you foresee in the industry over the next 3-6 months? What I see driving growth in IT is increased domestic business activity. With rate hikes continuing, investors should keep an eye on what these do to the overall economy. And without consumer participation at levels we’ve seen in the recent past – through home refinancing, etc. – the economy may slow down. New opportunities still exist in the emerging Asia/Pacific region, as well. China, while not growing new sales at quite the clip it had been, is still growing at a pretty good rate. Dell, even as big as they are, doesn’t have a huge presence in China, so there’s still a really good opportunity for growth there. Overall, the Asia/Pacific market is not yet saturated with domestic IT players, so companies who expand there should reap big benefits. Mostly, however, the biggest thing to watch is the U.S. economy. For investors looking for exposure in IT, it will be important to make sure businesses keep spending. Steve Biggs, CFA is a senior Zacks analyst covering the information technology industry. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - BULL OF THE DAY CoTherix, Inc. (CTRX) - New Drug Offers Advantages. For full Zacks research report, click here. Comerica, Inc. (CMA) - Estimates Lower After Guidance. For full Zacks research report, click here. End in Sight Industry Rank for the Week of November 14
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=2335. “Tips on Trading the Zacks Rank: Filtering the Zacks Rank” I’m sure most everyone reading this knows that the Zacks Rank is probably the most effective rating system out there. Good markets or bad, stocks with a Zacks #1 Rank continue to outperform. In fact, since 1988, the average annualized return of Zacks #1 Rank stocks is up 32.8% a year. But what I want to focus on today is how to try and recreate those returns in a practical trading account. Since there are typically over 200+ stocks with a #1 Rank at any time, it’s important to know what other filters to apply to the Zacks Rank to generate a smaller (more tradable) watchlist. Two filters in particular, when added to the Zacks #1 Rank, not only narrows down the number of qualified stocks to a practical portfolio size (approximately 10-12 stocks), it often times increases its performance as well. The two filters I’m talking about are:
These two items added to the Zacks #1 Rank, produce powerful results! I ran a series of separate tests on the Filtered Zacks Rank strategy over each of the last 3-1/2 years (2002, 2003, 2004 and YTD 2005). I rebalanced the portfolio every four weeks and started each run on different start dates so each test would be rebalanced over a different set of four-week periods. (This is done to eliminate coincidence and verify robustness.) In 2002, the Zacks #1 Rank stocks returned just over 1%, with an average portfolio size of approx. 200 stocks. An impressive return when compared to the S&P 500’s –22%. But holding onto 200 or so stocks isn’t doable for most investors. But when adding the two aforementioned filters, the portfolio size shrinks to a tradable 10 stocks (on average), and a phenomenal 18.1% return. In 2003, the Zacks #1 Rank list (approx. 200 stocks) did nearly 75% in comparison to the S&P 500’s almost 29%. But the filtered Zacks Rank narrowed that list down to only 10 stocks (on average) with a return of over 66%. (And while it’s true the filtered Zacks Rank produced a smaller return than the full Zacks Rank (66% vs. 75%), rebalancing only 10 stocks a month is far more manageable than 200.) And it was right on track again for 2004. The annualized returns for the Zacks #1 Rank stocks was up 28.8% with an average portfolio size of 202 stocks. (The S&P was up only 10.9%.) But the filtered Zacks #1’s annualized returns were up 30.3% with again, only 10 stocks to hold on average. And so far for 2005 (YTD -- thru 10/28/05), the complete list of the Zacks #1 Ranked stocks is showing an average cumulative gross return of 16.8% with an average portfolio size of over 200 stocks. But the Filtered Zacks Rank is up 24%, (over 40% more), but with an average portfolio size of only 10 stocks. (And while both of these numbers are impressive, 10 stocks is way easier to trade than 200.) Here’s a few of the stocks that qualified the Filtered Zacks Rank this screen (11/14/05):
Get the rest of the stocks on this list and start trading the filtered Zacks Rank in your own account. Remember, the key to successful screening is in discovering those screens that have produced profitable results in the past. And that’s exactly what you get with the Research Wizard stock picking and backtesting program. Click here to learn more. Discover all the Free Screening Tools on Zacks.com at: http://at.zacks.com/?id=2336. 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. ZACKS #1 RANK STOCKS The Zacks #1 Rank (Strong Buy) list is always limited to approximately 220 stocks. Four stocks that are currently included in this elite group are: Knight Capital Group, Patterson-UTI Energy, Plexus Corporation and Quanta Services. Intevac, Inc. (NASDAQ: IVAC) recently released third-quarter earnings of 29 cents per share, which more than tripled last year’s seven cents and exceeded analysts’ expectations by approximately 26%. The company mentioned that its quarterly results reached record levels in terms of both revenue and profitability. Full year 2005 earnings estimates are above one month ago levels by two cents, or about 3%. Continue your research on IVAC at: http://at.zacks.com/?id=2275. Intuitive Surgical Inc. (NASDAQ: ISRG) recently posted third-quarter earnings of 55 cents per share, topping last year’s 17 cents and soaring past the consensus estimate by about 96%. The company noted that its quarterly financial results reflect the continued adoption of da Vinci Surgery, which enables surgeons and medical centers to provide the high-value procedures sought after by today's highly informed patients. Earnings estimates for the year ending December 2005 were revised upward by 12 cents, or almost 8%, over the past seven trading days. Continue your research on ISRG at: http://at.zacks.com/?id=2276.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - M Systems Flash Disk Pioneers Ltd. (NASDAQ: FLSH) recently reported third-quarter earnings of 34 cents per share, outpacing last year’s 16 cents and jumping ahead of the consensus estimate by 36%. The company commented that continued strong performance in its target markets, coupled with the strategic initiatives it has undertaken, positions FLSH for continued success in the fourth quarter and beyond. The company raised its full year 2005 earnings forecast from earnings of per share at or above $1.00 to $1.08. Current Wall Street estimates of $1.10 also represent an increase from one month prior levels of $1.02. Continue your research on FLSH at: http://at.zacks.com/?id=2277. Supertex, Inc. (NASDAQ: SUPX) announced fiscal second-quarter earnings of 31 cents per share in mid-October, beating the consensus estimate by almost 35% and improving on last year’s 15 cents. Net sales increased by 26% sequentially and 30% year-over-year. Earnings estimates for the year ending March 2006 climbed 32 cents, or roughly 34%, from one month ago. Continue your research on SUPX at: http://at.zacks.com/?id=2278. To see the full list of Zacks #1 Rank stocks (approximately 220 stocks), go to http://at.zacks.com/?id=2279. The Zacks Rank is a powerful stock indicator whose #1 Strong Buy stocks have risen by an average annual return of 33% since 1988 versus 11.8% for S&P 500. To help you fully understand how the Zacks Rank works and, more importantly, how you can profit by using the Zacks Rank, we have created a free report - The Zacks Rank - Harnessing the Power of Earnings Estimate Revisions. This valuable information is available at: http://at.zacks.com/?id=2332. 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.
Yesterday Gregory Spear and his team noted the powerful “scouting party” buy program that hit the market mid-day on Wednesday. That was a test for what happened on Thursday, when we got the real thing. Thursday’s rally was a textbook large-cap affair with the highest volume of the week. This is one more confirmation of the validity of this rally. Spear and his team’s technical read of the market internals is equally supportive. On Thursday the selling in the energy patch was rather severe, as oil fell into the $57 range. The crude oil market trades in a very technical manner, if you know the formula. Once a recognized support level has been breached, then the market falls to the next support in the pattern. The next support level is the $55 target Spear and his team have been forecasting for the last month. They do not expect crude to immediately recover, which has bullish economic implications and is one important justification for the current market rally. In the weekly edition, Spear and his team profile New Century Financial (NYSE: NEW), the subprime lender they have in their trading portfolio at this time. In September, New Century cut earnings guidance due to shrinking margins, which caused a nasty gap down in the stock. The real estate investment trust said it now expects full-year earnings per share of $7.25 to $7.75, down from its prior target of $8.25 to $9. That knocked shares down from $38 to $30. Nevertheless, NEW maintained dividend guidance of $6.50 for 2005 and $7.30 for 2006. NEW is a REIT and distributes its earnings as cash. At a $34 share price, that is a 21% dividend return over the next 12 months. Spear and his team are also profiling an “avian flu stock,” but the company, Cepheid (NASDAQ: CPHD), is really much more than that. This is the company whose technology is used by the US Postal Service to check for anthrax. While most AI stocks are currently losing altitude, CPHD has gone up every day in the last week. Active traders need PROVEN professional-level tools! The Spear Report Professional Edition is a premium DAILY trading service. The TSR Pro trading strategy incorporates both fundamental and technical analysis. Gold, index proxies, shorts, longs…Pro covers it all EVERY SINGLE DAY! Sign-up now and find out how to make money in ANY market, up or down. With TSR Pro, it’s like having your own personal research assistant. http://at.zacks.com/?id=2347. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - b) Cash Rich Companies Provide a Ballast in Choppy Seas Bill Martin is comforted by the fact that many of his holdings are liquid. Learn why and discover some of the names. More... Jack Schannep provides some guideposts to help investors determine the probable outlook for the economy and the market. 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 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=2332. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=2279. 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 Zacks Performance Rank performance is the total return of equal weighted simulated portfolios consisting of those stocks with the indicated Zacks Rank net of fees. Results reflect the reinvestment of dividends and other earnings. Simulated results do not represent actual trading and may not reflect the impact that economic and market factors might have had on decision-making if an adviser were actually managing a client's money. 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
- Roundtable Top Picks of the Week
- FED Front & Center Again
- RTI: Sector Strength Charts - Where's the Opportunity Now?
- Surging Financial ETFs Beating the Market
- Utility Industry Stock Outlook - June 2013
- 3 Japanese Stocks to Buy Now
- Your Next Stock Should Be Making New Highs
- Anatomy of Success: Stoneridge (SRI)
- RTI: What Will the Fed Do Wednesday?
- AWS 6/18: Can the Fed Afford to Keep the Suspense?
- PFP 6/18: Wednesday Fed Watch
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 06/18/2013
| Company Name | Symbol | %Change |
|---|---|---|
| STAAR SURGIC | STAA | 10.98% |
| LUMOS NETWOR | LMOS | 5.70% |
| INSTEEL IND | IIIN | 5.28% |
| ERICKSON AIR | EAC | 5.10% |
| ASSURED GUAR | AGO | 4.98% |
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.