Thursday - December 29, 2005
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2337. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH Recently I put out a list of six stocks that I thought would be good solid investments for 2006. That list was culled from the Buy recommendations of the Zacks Equity Research analyst team. That list was designed to be a good, solid stand-alone – if very concentrated – portfolio. The list I present today was also created from the recommendations of the Zacks analysts. However, while the stocks listed have nothing in particular with each other (except that I believe they are interesting speculations), and thus should not be all that highly correlated, the list is not designed as an overall portfolio. No more so than a handful of lottery tickets is a portfolio. I am sure that some of these stocks will do very well in 2006; my hope is that they will more than double. However, it is very likely that some will go the other way, and possibly in a very big way. These are not stocks to bet the ranch on, but could be very interesting additions to an already well-diversified portfolio. They are small- to mid-cap companies, and generally have a history of price volatility. All pricing and valuations for this report are based on the December 27, 2005 close. Southern Peru Copper (PCU): Even though this stock has done very well recently, up 45.9% over the last year, metals and mining analyst Michael Schrage, CFA thinks there is more to come. With copper currently trading for $2.23 a pound, PCU will be earning more than just pennies. The prices for the key by-products in mining its copper, silver and moly, are also very strong. Michael conservatively thinks that PCU will earn $8.00 in 2006, which puts PCU’s P/E at just 8.5x. PCU also yields 9.4%. A very good short-hand description of a cheap stock is one where the yield is higher than the P/E (as long as the payout ratio is below 100%). Strong economic growth from India and China should keep demand for copper high in 2006. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ACADIA Pharmaceuticals (ACAD): ACADIA Pharmaceuticals, Inc. is a biopharmaceutical company utilizing innovative technology to fuel drug discovery and clinical development of novel treatments for central nervous system disorders. The company currently has five drug programs in clinical and preclinical development directed at large unmet medical needs and major commercial markets. Drug and biotech analyst Jason Napodano expects that news coming out of the Phase II trials on ACP-103 (for Parkinson’s Disease and Schizophrenia) and ACP-104 (for Schizophrenia) will be the catalysts to move the stock significantly higher. ACAD does not currently have any drugs approved for sale. However, both markets are very large relative to ACAD’s market cap of only $232.5 million, and if either one makes it to market, the shares should soar. W-H Energy Services (WHQ): WHQ is a small oil service firm which specializing in providing oil companies with information about the conditions inside the wells where the companies are drilling. It has developed leading market positions in niche oil service markets by offering technologically advanced and cost-effective products and services. With the large oil firms flush with cash and under political pressure to raise oil and gas production, it is assured that the revenues and earnings of the oil service firms will rise dramatically in 2006. Barring a collapse in energy prices (which I emphatically do not think will happen – the growth in the industry should continue for several years), oil analyst Sheraz Mian thinks that WHQ can earn $2.38 in 2006, up from $1.68 in 2005 and $0.78 in 2004. WHQ is currently trading for only 14.5x 2006 earnings – less than the overall market – and has far better growth than most firms. Energy Conversion Devices (ENER): With the price of petroleum high, and in my estimation likely to remain high for a sustained period, interest in alternative sources of energy will grow. ENER is a leader in the field of solar energy and produces photovoltaic devices which are rugged, lightweight and flexible. As production ramps up, the cost per unit will fall and this will put ENER in a virtuous circle where by increasing demand leads to falling prices, which leads to yet more demand. Recent marketing agreements will substantially increase distribution of its products in Europe. In addition, ENER, in a joint venture with Chevron, produces advanced batteries that are used in electric and hybrid cars. Hybrid cars are likely to increase their share of the auto market substantially over the next five years (albeit from a very small current base). ENER’s technology is also being investigated for the production of a new class of memory chips which have faster write and erase speeds than FLASH and DRAM chips. Utilities and alternative energy analyst Jon Kolb expects that ENER will become profitable on a sustained basis in fiscal year 2007. GameStop (GME): With its recent acquisition of Electronics Boutique, GME has emerged as the unchallenged leader in sales of video games. Its stores are staffed by serious gamers, unlike the staffs at the big discount retailers who form GME’s most serious competition. With the release of new generation hardware platforms (Xbox 360, with Playstation 3 and Nintendo Revolution scheduled to debut in the spring of 2006), the video game industry should enter a new up-cycle. With over 4,400 retail locations, GME stores are within bicycling distance of most of its target customer base. While the transition to new platforms is temporarily depressing sales (until the new platforms are widely available), they should pick up later in 2006. Retail analyst Rob Plaza, CFA expects that GME will earn $1.51 in its January 2006 fiscal year, rising to $1.75 for 2007, up from $1.11 in fiscal 2005. Joy Global (JOYG): In a gold rush, the big fortunes are often made not by the miners, but by those who sell them picks and shovels. The premier provider of today’s picks and shovels (i.e. electric shovels that pick up 50 tons in a single scoop) is JOYG. Worldwide economic growth, particularly growth in India and China, has led to a boom in mining, particularly coal, copper and gold. High oil and gas prices have dragged coal prices along for the ride, and have led to huge expansions of oil sands projects in Canada (where oil is mined rather than drilled). From 2003 through 2005 (October fiscal year) JOYG’s revenues have expanded 62.5%, leading EPS to expand more than sevenfold. Machinery analyst Mario Ricchio expects this trend will continue in 2006 with a 23% increase in revenues leading to a 78% rise in EPS. Aftermarket parts and services account for 63% of JOYG’s revenues. So the current sales of “razors” should lead to increases sales of “razor blades” for many years to come. Given its dominant market position in a growing niche, JOYG looks attractively priced at 18.7x Mario’s 2006 earnings estimate. Final Note: Remember, these stocks are interesting speculations, and involve much more risk than the stocks mentioned in my first Six for ‘06 list. I think they would be interesting speculations in the context of an already well-diversified portfolio, and I would not recommend anyone putting a substantial portion of their investable assets into any of these stocks, either individually or as a package. My first list was designed so it could be a stand-alone (albeit highly concentrated) portfolio. That is not true of this list. While WHQ has a much better chance of being a double in 2006 than does COP (one of my first “Six”), it also has a much higher probability of suffering a major decline. I expect that by the end of 2006, a few of the stocks on this list will have more than doubled, a few will have matched the market, and there is a very real possibility that one or two could be down by over 50%. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - BULL OF THE DAY ACADIA Pharmaceuticals (ACAD) - Strong Pipeline. For full Zacks research report, click here. Sappi, Ltd. ADR (SPP) - Industry Overcapacity. For full Zacks research report, click here. Earnings Forecasts Favor Mega-Caps Zacks Industry Rank for the Week of Dec 26
2. TOP SIMULATOR PLAYER INTERVIEW Zacks.com features a free investment simulator where our customers can prove their stock picking skills to the rest of the world. In these articles we will share with you the insights and recommendations from Top Simulator Players. Learn more about the current Zacks Investment Challenge at: http://at.zacks.com/?id=2514. This week Zacks interviewed Boris Petrov (aka: “Borissa”), who is currently in fourth place in the Stock Simulator game. It was Google that led Boris to Zacks’ Simulator game. While on Zacks.com, this informed investor found the financial newsletters that are posted on the site to be an effective research tool. In fact, Boris is a fan of newsletters in general when he is searching for insight on investing. The Simulator competitor also cited past experience and intuition as catalysts for his stock picks. Currently, this player’s portfolio boasts an overall return of 80.67%. His top holding is ViroPharma Inc. (VPHM). Discover Boris’ complete portfolio at: http://at.zacks.com/?id=2515. The savvy market player alluded to being a momentum trader, commenting that he likes fast moving instruments. Not surprisingly, Boris is also follows the Foreign Exchange (FOREX) market. How does this investor know when it is time to get out of position? Boris again referred to intuition as a sell indicator. Whatever trading formula or philosophy he implements, this contender is doing something right. At one time, Boris experienced profits of approximately 1000% in one day. What does the market watcher see going forward? He does not seem too optimistic. “Some things tell me that there are weak hopes for positive activity in the future,” said Boris. Regardless of what the future may bring, the successful player believes that stock simulators are terrific investment practice platforms. According to Boris, practice makes perfect. He advocates using play money to make profits before diving into the market with real cash. The Challenge is On! Sign up now for the Zacks Investment Challenge. Its free. Its fun. It’s the place to show your investing prowess. The best stock pickers will be rewarded with thousands of dollars in prizes. Learn more. 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... Profit Tracks: PEG Ratio This strategy uses the PEG Ratio to find attractively priced stocks poised for price appreciation. The PEG Ratio is simply the P/E (Price divided by Earnings) of a stock divided by its 5-year projected growth rate. Too often investors think of value investing being the antithesis of growth investing. The beauty of using PEG is that you can find value stocks even amongst hot growth stocks. If you like to use a company's PE ratio to determine its value, you'll love using the PEG ratio. Find out which companies offer the greatest value regardless of growth rate to enjoy stellar returns. Using this indicator in a stock screening strategy can produce stellar profits, such as a +38.9% return in 2004 and continued strong returns in 2005. Here are four stocks that make the grade for the PEG Ratio Profit Track: Cutera, Inc. (CUTR) reported third-quarter earnings of 27 cents per share in early November, soaring past last year’s seven cents and jumping ahead of the consensus estimate by nearly 108%. The company stated that demand for its multi-application CoolGlide Xeo system, the Titan application, and the Solera platform, remain strong as customers continue to acquire its systems and upgrades to address the increasing consumer demand for non-invasive aesthetic procedures. CUTR boasts a PEG ratio of .50. Continue your research on CUTR at: http://at.zacks.com/?id=2354. Pioneer Drilling Co. (PDC), a Zacks #1 Rank (Strong Buy) company, released its report for the fiscal second quarter in early November. Earnings per share of 24 cents surged past last year’s three cents and topped the consensus estimate of 21 cents. With a PEG ratio of .37, value investors may find this to be a good addition to their portfolio. Continue your research on PDC at: http://at.zacks.com/?id=2355. More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Rush Enterprises Inc. (RUSHA) operates the largest network of heavy-duty and medium-duty truck dealerships in North America and a John Deere construction equipment dealership in Houston. The company posted third-quarter earnings of 53 cents per share in mid-October. The result beat the consensus estimate by about 10%. RUSHA stated that its outlook remains positive as industry experts forecast class 8 truck sales to remain strong throughout 2006. The company has a PEG ratio of .33.Continue your research on RUSHA at: http://at.zacks.com/?id=2356. Technology Investment Capital Corp. (TICC) announced third-quarter earnings per share in early November. The result was ahead of the previous year’s total and topped the consensus estimate by about 23%. Analysts have been optimistic about TICC’s earnings for the 2005 full year as evidenced by the increase in earnings estimates of almost 4% over the past 90 trading days. The specialty finance company has a PEG ratio of .27, which suggests the stock is trading at a significant discount. Continue your research on TICC at: http://at.zacks.com/?id=2357. To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=2358. 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=2359. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Using Common Sense to Manage your Portfolio Kevin Matras explains why monitoring your stocks is just as important as picking them. It's simple common sense that can make all the difference: http://at.zacks.com/?id=2360. 4. ZacksAdvisor.com TIMELY BUY of the WEEK Here you'll discover a Zacks #1 Rank 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’ (BCSI) 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 a strong earnings report. Net earnings for the quarter ended Oct. 31 climbed to $4.2 million, or 28 cents per share, versus $607,000, or 5 cents per share, last year. Excluding one time items, Blue Coat earned $4.7 million, or 32 cents per share, versus $1.1 million, or 9 cents per share. Revenue rose to $36.7 million, up 67 percent from $21.9 million, but that figure missed analysts' expectations for $36.8 million in sales. During the quarter, Blue Coat added 300 new customers to its roster, including US Cellular, Cox Enterprises, ESPN, and Telecommunication of Thailand, and expended its Asia-Pacific operations to a total of nine locations. Looking ahead to the third-quarter, Blue Coat predicted that net income would range from $4.4 million to $5.1 million, or 30 cents to 34 cents per share. Excluding one-time items, earnings are expected to range from $4.7 million to $5.4 million, or 32 to 36 cents per share, with sequential revenue growth of 4 percent to 7 percent. That projects to revenue of $38.2 million to $39.3 million. The stock is currently trading at 27x the newly revised 2007 estimate of $1.68 per share. Even after a year-long run-up, this is below the long-term growth rate of 28.45%. Earnings momentum is strong at this company as evidenced by the upward trend in estimates over the past 90 days. Over that time period, estimates for 2007 have increased 9.8% to $1.68 per share. BCSI sold off a little after the last earnings release, but it should prove to be a great buying opportunity as the prospects have not deteriorated at all going forward. This stock is still relatively unknown on Wall Street, which leaves plenty of room for upside as more investors learn about their success.
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=2350. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=2351. FREE PORTFOLIO TRACKER Do you believe that these events affect stock prices?
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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 | GLW | 4.47% |
| SYNCHRONOSS | SNCR | 4.23% |
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