Friday - December 16, 2005
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2283. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH With energy prices continually accelerating, we felt now would be a good time to look into how alternative energy is progressing. Which are the most productive forms? Are there any plays the average investor can make at this time? These questions and more we posed to Jon Kolb, CFA, utilities and alternative energy analyst for Zacks Equity Research. What types of alternative energy are the main ones currently being pursued? Well, there are all kinds – wind power, geothermal, photovoltaic (which is the technical name for solar power) – about a half-dozen major kinds of alternative energy are being significantly worked on at this time. One relatively newer source is what’s called marine power, which I find very interesting. Marine power has plans in the works to harvest the currents from the floor of the ocean, and this could have tremendous potential in the development of a truly renewable source of energy. Would this be similar to the way dams harvest energy? Yes, in a way marine power is like hydropower, which is how dams are used, but this is a separate category. Marine power is also similar to wind power, in that these big turbines on the surface of the ocean floor will be able to capture the energy from large currents, such as when we have those huge weather patterns from El Niño and La Niña. This technology should really be able to generate tons of power. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - So which forms do you see as the most developed or fastest growing at this point? Hydropower, as you may already know, has been with us since the 19th century, so it’s pretty well developed already. But there are really just all kinds of alternative energy being worked on, and at this relatively early stage in the industry there are many, many places we can focus our attention. Biomass is one of the more developed areas in this space. Even President Bush came out and advocated biomass as a good use for excess corn that sits in silos and just goes to waste. The government already pays farmers to grow corn, so there might as well be a use for the surpluses. Biomass can refer to almost anything, though, really. Some utilities are getting into using wood pellets. Some are even looking into using turkey droppings! Basically, any matter with carbon and hydrogen that can be burned and used to create energy can be considered a biomass form. Hydrogen-powered fuel cells is one of the fastest growing segments of alternative energy. This is largely due to the growth we’ve seen in consumer electronics – iPods, digital cameras, PDAs, etc. A dozen or so companies are working directly on fuel cell battery packs that have a longer life than the current lithium batteries we use in our cell-phones and laptops. This technology looks to be win-win for the companies working on hydrogen fuel cells, in that they are able to make improvements on current technologies while also being able to advance their new alternative energy developments. What are your growth projections for alternative energy? Again, the point I’d like to stress is that there are so many different forms of developing energy sources, it’s hard to really even call it one industry. But to the extent that we can, I expect alternative energy companies to grow like tech stocks – 35% per year over the next 5-10 years. This is a compound average, of course; not all these companies will grow 35% every year. We should also keep in mind that this is a 5- to 10-year story. It’s going to be awhile before we really start seeing these initiatives coming online. These sources are not immediate, and can’t be implemented on a grand scale. Are there any obstacles in the way of this type of growth? Sure there are. When Bush got his Energy Policy Act pushed through both houses of Congress earlier this year, it was pretty disappointing on the alternative energy front. There are not as many new incentives for investment in alternative energy to decrease this country’s reliance on foreign oil. There were some tax incentives for energy producers and distributors – like utilities – to use some percentage of capacity production from alternative energy sources. In fact, many states require utilities to supply at least some percentage – single-digits to teens – of their energy from alternative sources. This is at least a start, and it is moving in the right direction. But one of the most important points about the industry as a whole is that the most productive source of energy right now is still petroleum. In terms of power derived per volume, a gallon of oil produces many times more power than the same volume of anything else. And I can recall one statistic I read that said to furnish New York City with enough solar power for one day, it would require putting solar panels on every surface in the city facing the sun for about an entire month. That’s just to get enough energy for one day! So, using solar energy as an example, it’s really not yet an efficient energy source, considering how much power this country uses every day, every month, every year. By the way, you’d have to go back 25 years or more to see the last major push in this country for alternative sources of energy, when Jimmy Carter was president. I can remember when he went up on the roof of the White House, installed a solar-powered hot water heater – this is right after the OPEC price spikes in oil – then went on TV wearing a cardigan sweater, which was pretty unusual for a president, and probably would be even today. His basic point was that people should take initiative and do what they can to try and beat back the energy crisis. Wear a sweater instead of turning up the thermostat, install some solar panels on your house. This had a milestone impact on the alternative energy industry, though it didn’t really last. We haven’t had that type of commitment to alternative energy since. Not even Clinton was as progressive as Carter, though it was a different time. We weren’t embroiled in a major energy crisis with OPEC like we were back in the 70’s. The main point I want to make, though, is that the real issue facing this industry is its ability to harness power more efficiently than petroleum. We’ll see where research and development goes. But right now, even though hundreds of millions of dollars are being spent on R&D, this industry probably needs billions to show real progress. And help would need to come in the form of incentives from the federal government. Isn’t wind power a good source of energy? And isn’t it growing at a desirable rate? Wind farms have been relatively efficient so far. Once the turbines are up, they have fairly long lives – about 50 years or so. These wind farms can generate efficient levels of power for smaller communities. But people don’t like them; they find them unsightly. People in the Northeast especially, where I live, pay lots of money for their homes, and they claim these wind turbines are hurting their property values. I guess most of them see wind energy as a desirable thing, but not 100 miles of the coast of their home in Nantucket. When they want to sit outside in their yard, they see these big white poles with big fans attached to them. Ultimately, though, I’d admit this is a pretty selfish argument. Kansas has recently put up a big wind farm. Texas also has wind farms. Kind of like the big areas of growth for solar power are in sunny areas like Florida, California, Arizona, etc., wind farms will likely see growth in areas where wind can be harvested easily. I’m sure most investors consider 35% a pretty nice growth rate per year. Where should they be focusing their attention? Well, in the U.S. alone there are 50 publicly-traded pure-play alternative energy companies, and by that I mean companies whose primary products are in one or more of these forms – wind, solar, geothermal, whatever. Generally, these are small market-cap companies; large-cap players in this market, such as General Electric (GE) or International Rectifier (IRF), generate only single-digit production from alternative energy. And that’s only in the U.S. Solar opportunities in Europe, particularly Germany and Spain, are growing much faster than they are here. Lots of small Canadian companies trading in pink sheets are relatively pure-plays on alternative energy, as well. So in short, there are lots and lots of opportunities to play growth in alternative energy. What I would definitely recommend is investors look for “green funds” that have a diversified portfolio of 30-40 names, with both U.S. and international exposure. There are a number of these green funds out there, and are easy to find on financial websites and the like. Like I mentioned earlier, not all of these alternative energy companies will do great, so a good diversified fund is the way to go for now. I wouldn’t play off the larger-cap stocks like GE, either. It would be far better to buy smaller companies and then get a premium when one of these big firms buys them out. Jon Kolb, CFA is a senior analyst covering utilities and alternative energy for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - BULL OF THE DAY Lexicon Genetics (LEXG) - Impressive Progress. For full Zacks research report, click here. Tweeter Home Entertainment (TWTR) - Remains Unprofitable. For full Zacks research report, click here. Machinery Still Working All Eyes on the New Year
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... Profit Tracks: Low Price Stocks Many investors prefer stocks priced below $20 because the low prices allow them to accumulate more shares. Fortunately, lower prices do not necessarily mean lower quality. This strategy identifies stocks priced below $20 that are trading at discount valuations and have a Zacks Rank of #1 ("Strong Buy") or #2 ("Buy"). The stocks identified by this search strategy trade at price-to-sales (P/S) multiples of 1.0 or below. The strong Zacks Rank is indicative of positive revisions in earnings estimates. Combining these characteristics can result in high-dollar returns. In 2004, this strategy generated a stellar +54.8% return. Equally impressive, the strategy has a win ratio of nearly 75% for the past 4-1/2 years. Here are four stocks that make the grade for the Low Price Stocks Profit Track: AEGON N.V. (AEG), an insurance company, reported third-quarter earnings of 39 cents per share in early November. The result outperformed the year ago level. The company stated that in the U.S. there were notable increases in life sales to institutional clients as well as in AEGON's variable annuity business sold to individuals. The stock is currently trading around $16.60 per share, with a price-to-sales ratio of 0.37. AEG has earned $1.80 per share over the past 12 month. To continue your research on AEG click here. Goodyear Tire & Rubber Co. (GT) is currently trading around $17.40 per share, with a price-to-sales ratio of 0.16. Over the past 12 months, GT has earned $1.26 per share. In late October, the company posted third-quarter earnings per share that topped the consensus estimate by nearly 57% and eclipsed the previous year’s result. Goodyear mentioned that six of its business units achieved third quarter sales records, and all of its tire businesses achieved improvements in segment operating income compared to last year. To continue your research on GT, click here. LESCO, Inc. (LSCO), leading provider of products for the professional green and pest control industries, satisfies the criteria of this Profit Track with a current price of approximately $16.00 per share and a price-to-sales ratio of 0.25. In late October, the company announced third-quarter earnings of 44 cents per share, excluding charges. The result outpaced the consensus estimate by about 2%. LSCO has earned $1.02 per share over the past 12 months. To continue your research on LSCO, click here. Mesa Air Group, Inc. (MESA) released its fiscal fourth-quarter financial results in mid-November. Earnings per share were ahead of analysts’ expectations by nearly 17% and surpassed the prior year’s performance. Total operating revenues increased 18.9% year-over-year. The stock is currently trading around $9.30 per share, with a price-to-sales ratio of 0.24. The company has earned $1.30 per share over the past 12 months. To continue your research on MESA, click here. To see the full list of stocks that currently pass this winning screen, go to http://at.zacks.com/?id=2294. 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=2295. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Price Targets and 'Multiple' Expansion Kevin Matras shows you how to create your own price targets and how to estimate your stocks' future earnings multiple: http://at.zacks.com/?id=2289. 3. ZACKS #1 RANK STOCKS Every day on Zacks.com we highlight four Zacks Rank Buy stocks. Each individual stock is chosen based on how well they match the criteria for the four main schools of investing: Aggressive Growth, Momentum, Growth & Income and Value. Aggressive Growth – Guess? (GES) Growth & Income – Brady Corporation (BRC) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum – Electronics for Imaging (EFII) Value – WR Berkley Corporation (BER) 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=2296. 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 S&P 500 continues its slow, grudging march toward what Dr. Melvin Pasternak believes will eventually be a 2005 peak near 1285. On Wednesday, the index hit a new intraday high for the current rally of 1275.80, and it hung on to a new closing high of 1272.74. Since an uptrend is defined as a series of rising peaks and valleys, this new high confirms the existing trend. The index is now at its highest level since June 2001, a period of nearly 4 ½ years. Dr. Pasternak continues to hold to his earlier thesis: the market will not close out the year with a robust advance, but it will not see a sharp correction either. The upper weekly Bollinger band is now at 1279, and the upper daily band is at 1277. The upper weekly channel line is at 1280. Each of these should supply technical resistance to a further advance. Dr. Pasternak has also noted some recent technical deterioration. On the daily S&P chart, Wednesday's new high was made with bearish momentum divergence in MACD, RSI and ADX. While bearish divergence can persist for extended periods of time, momentum changes typically precede price changes, so this divergence could be an early warning sign. The Nasdaq Composite and the Dow Jones Transportation Index have been co-leaders off the October 13th bottom. However, both indices have now broken below their relative strength trendline and moving average. Perhaps this weakness is simply group rotation, but if the S&P is to accelerate out of its existing channel, then these two indices should be far stronger than they are. On the long side, broker Morgan Stanley (MWD) remains attractive in the short term. Dr. Pasternak first spotted MWD in the October 31st issue of the Swing Trader when the shares were trading at $53.93. Dr. Pasternak’s target is $59.95. MWD has found good support just under the $56 level several times, and Dr. Pasternak would sell if the 30-day moving average at $55.58 is violated. Dr. Pasternak initially flagged women's health care provider Conceptus (CPTS) in the November 14th newsletter at $13.35. The shares then went as high as $15.95 on November 30th. The stock is now at a crucial juncture. It should find support at its rising 50-day moving average, which is currently at $12.25. Dr. Pasternak first highlighted Red Hat (RHAT) in his October 31st newsletter at $22.15. The stock then moved higher, testing round-number resistance at $25. It continues to consolidate near that level. On Wednesday, the shares gained $1.43 on a brokerage upgrade and positive comments from the analyst who argued that Linux's penetration of the Windows and Unix operating systems in the enterprise software market should boost sales. The stock should be able to trade into the high $20s. With just a few short-term trades each month, using a small portion of your portfolio, you can boost your total portfolio returns to levels not seen since the Internet craze. Discover how and receive the free five-part course, --“Swing Trading Done Right: The Secrets to Putting the Odds in Your Favor.” http://at.zacks.com/?id=2428. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Gregory Spear cites NASDAQ’s recent lag and discusses a possible homebuilder rally. More... c) Crude Oil is Poised to Correct Mutual fund expert Dennis Slothower explains that since investors are not seeing a shortage in oil supplies, rising oil prices may end. 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 stocks (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=2296. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=2297. 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. | |||||||||
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Zacks #1 Stocks on the Move 05/23/2013
| Company Name | Symbol | %Change |
|---|---|---|
| ALLIANCE FIB | AFOP | 5.21% |
| CYNOSURE INC | CYNO | 4.42% |
| DAWSON GEOPH | DWSN | 4.33% |
| MARRIOT VAC | VAC | 3.27% |
| BLOOMIN BRAN | BLMN | 2.93% |
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