Monday - December 19, 2005
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2314. 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 Trident Microsystems (TRID) - Well-Placed in LCD TVs. For full Zacks research report, click here. Albertson`s, Inc. (ABS) - More Downside Risk. 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
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we highlight... Profit Tracks: Upgrades and Revisions This strategy focuses primarily on Positive EPS Estimate Revisions and Brokerage Rating Upgrades. Over the last 20 years Zacks Investment Research has proven that "earnings estimate revisions are the most powerful force driving stock prices." Studies have also shown that stocks receiving upward EPS revisions tend to receive additional upward revisions in the future. Then consider that stocks receiving these upward revisions generally have brokers upgrading their Ratings, which is also a proven mover of stock prices. There are other parameters to this strategy, but the Rating Upgrades and positive EPS Revisions are the two powerful active ingredients. This screen focuses on EPS Revisions, along with Broker Ratings and Rating Changes. According to Zacks Investment Research "earnings estimate revisions are the most powerful force impacting stock prices". Couple that with the proven benefits of upgrades in ratings from brokerage firms and you have a strategy that delivered a +55.7% return in 2004. In 2005, the Upgrades and Revisions Profit Track is continuing its trend of delivering double-digit returns. Altiris, Inc. (NASDAQ: ATRS) the holding company of American Community Bank, reported third-quarter earnings of 25 cents per share in mid-October. The result topped the consensus estimate by approximately 4%. The company, which has a net margin of .13, managed to produce annual earnings growth of 65% above the previous year. Continue your research on ATRS at: http://at.zacks.com/?id=2254. Axsys Technologies, Inc. (NASDAQ: AXYS), a global leader in the design, manufacture and distribution of precision optical solutions, reported financial results for the third quarter in late October. Earnings per share were ahead of analysts’ expectations by nearly 37%. The Zacks #1 Rank (Strong Buy) company mentioned that it continued to book substantial quantities of new business. AXYS brought in impressive earnings per share growth of approximately 136% over the past five years. Continue your research on AXYS at: http://at.zacks.com/?id=2255. Carpenter Technology Corp. (NYSE: CRS) is engaged in the manufacture, fabrication, and distribution of specialty metals and certain engineered products. The company, which is also a Zacks #1 Rank (Strong Buy), announced fiscal first-quarter earnings of $1.54 per share in late October. With Wall Street expectations coming in at $1.18, the earnings result was an upside surprise of almost 31%. The earnings total also topped the previous year’s performance. CRS experienced earnings per share growth of almost 22% over the past five years. Continue your research on CRS at: http://at.zacks.com/?id=2256. Lennox International Inc. (NYSE: LII) put together earnings per share growth of about 31% over the past five years. In late October, the company released its third-quarter report, stating that all of its business segments realized increased revenue and segment profit. The global provider of climate control solutions reported earnings per share that eclipsed the consensus estimate by almost 14% and outperformed the year ago result. Continue your research on LII at: http://at.zacks.com/?id=2257. To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=2258. 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=2307 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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=2259. 3. ZACKS RANK BUY STOCKS Every day on Zacks.com we highlight four Zacks Rank Buy
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investing: Aggressive Growth, Momentum, Growth & Income and
Value. Aggressive Growth – Cal Dive International Inc. (CDIS) Growth & Income – Taiwan Semiconductor Manufacturing Co. Ltd. ADR (TSM) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum – Dress Barn (DBRN) Value – Reliance Steel & Aluminum Co. (RS) To see the full list of Zacks #1 Rank stocks (approximately 220 stocks), go to http://at.zacks.com/?id=2266. 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=2267. 4. FEATURED EXPERTS Here we cast the spotlight on a timely Featured Expert commentary that recently appeared on Zacks.com.
November was such a positive month that many investors have been getting pretty excited about the prospects for a Santa Claus rally and a possible breakout above this nasty trading range we’ve suffered through the last couple of years. However, for the market to accelerate and sustain a positive growth trend Dennis Slothower thinks three fundamental changes are required. Quite frankly, none of them are happening right now. CRUDE OIL PRICES ARE RISING AGAIN However, crude oil prices have recently started to soar again, jumping from $56 to $60, and in the process breaking above oil's downtrend line that began a couple of months ago. If oil prices push much higher, extending the intermediate-term rally in the stock market seems questionable to Slothower. Oil stocks are clearly firming up. Slothower strongly recommends GMX Resources (GMXR). This company’s earnings are outstanding and the stock continues to advance in a very powerful uptrend. Frontier Oil (FTO) and Holly Corp. (HOC) are two refiners that could also be bought on pullbacks. While the oil sector could become hot again, this certainly doesn’t bode well for the growth stocks. Recently, as winter has intensified, the demand for oil has started to increase again. Inventories have started to fall with extra holiday driving and the need for heating oil. OPEC meets next Monday, though the market doesn’t see OPEC doing anything other than jawboning a level of support above $50 a barrel. However, if a Santa Claus rally is to develop, oil prices will need to back off again to give the stock market a chance at breaking above the top of the trading channel. At this point one has to be skeptical. FED LIKELY TO RAISE RATES With oil back above $60 and threatening to go higher, Slothower is now becoming doubtful that the market will get what it is looking for. Following next Tuesday’s expected rate hike, interest rates will be at the neutral level. Will this be the end? If the Fed language signals the prospect of additional rate hikes, the stock market will begin to view the Fed as with a hostile monetary policy, as the yield curve becomes inverted. Inverted yield curves traditionally forecast major economic downturns. This is why this upcoming FOMC meeting is so critical. For the stock market to break out and sustain a positive uptrend, the Fed needs to signal in some way that it is finished with interest rate hikes. We have been getting mixed signals from the Fed governor’s speeches, with some predicting higher rates while minutes from the last FOMC meeting showing concern that higher rates could begin to damage the economy. Several in the Fed recognize the risk they take if rates continue to climb. If the stock market is going to experience a break out the Fed must signal an end, otherwise stocks are likely to pull back in the very near future and begin the next intermediate down leg. MONEY SUPPLY IS TIGHTENING AGAIN For a breakout and a sustainable rally the Fed must also continue to expand the money supply. That is just not happening. Consequently, Slothower doesn’t think the market is out of the woods. We must see the Fed signal its intent. Assuming a Santa Claus rally could get you into real trouble. Prudence dictates that you know exactly what the Fed is going to do before any more exposure is taken. The direction the Fed will take is just not real clear right now. During my 25-year career as a money manager, I’ve tested
hundreds of market indicators. I’ve fine-tuned my strategy
using specific indicators that work together to predict the
market with incredible accuracy and find stocks flying under
the radar screen. Indicators are pointing to a strong bull
market in 2005. I don’t want you to miss a single day of
what I’m convinced will be a spectacular bull market. http://at.zacks.com/?id=2366 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=2309. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=2266. 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 and improve your portfolio's performance. Did we mention it's free? Get started now by going to: http://at.zacks.com/?id=2310 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. | |||||||||
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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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