Monday - February 27, 2006
 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 From sizable layoffs and labor disputes to high gas prices and a new market for hybrids, the U.S. auto industry has managed to claim and keep front-page headlines for some time. Senior auto analyst Paul Raman, CFA helped us understand what we most need to know about investing in the industry in 2006. The past couple years have been really rough for the U.S. auto industry. Do you see things improving soon? If so, how? The next couple of years are likely to be difficult. Companies are moving to reduce their legacy medical and retiree obligations. Plus, the number of employees will be reduced. This will lead to lower costs at the auto original equipment manufacturers (OEM) as well as the major auto suppliers. The costs for steel and other major raw materials will remain elevated, but should not move up further. Auto demand will remain weak due to rising interest rates – which makes it more expensive to finance an automobile purchase – and rising gas prices – which has reduced demand for the SUV – and rising imports. Pricing is likely to remain weak due to the need for incentives that will stimulate demand. What part do you expect hybrid cars to play for U.S. automakers in the future? Will they be able to compete with Japanese manufacturers, who have already gotten a head start? Hybrid cars represent a source of growth in the future should gas prices remain high. They represent only 1% of the market now. Market share gains by hybrids are likely to be slow due to slow consumer acceptance and skepticism. Japanese manufactures have taken the early lead, but Ford (F) is expected to be aggressive in this area in the next 3-4 years. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Have labor issues progressed at all? Are they still problematic? Labor unions are cooperating with the OEMs and suppliers by allowing a reduction in medical and retiree obligations. They are also allowing for some layoffs, but still are protecting income per worker. They are still hindering the cost cutting progress that would occur in their absence. Furthermore, overseas companies do not have to deal with unions and health/retire issues, which is the source of their large cost advantage. What are your top Buy recommendations at this time? The Honda Motor Company (HMC) is expanding its business in Asia, growing its global network to increase efficiency and introducing new products to satisfy local markets. Further, capacity expansion plans in Asia, a new sales strategy in Japan, and a proposed launch of Accura in Japan make us optimistic about Honda’s future prospects. Therefore, we rate it a Buy with a six-month target price of $31.25. Acquisitions, market share gains and product innovation are driving the top-line at Johnson Controls (JCI). The recent acquisition of York International will give JCI a leading position in the global buildings environments industry. Although high U.S. launch-costs, price concessions to OEM suppliers, rising commodity costs and an unfavorable product mix offset some of our enthusiasm, we remain optimistic about the stock. We rate the stock a Buy and set a six-month target price of $78.00. Also, Goodyear Tire (GT) is actively following its turnaround strategy and expects to achieve significant savings over the next three years. Restructuring and rationalization activities undertaken by management to contain costs and generate additional savings make us positive about the stock performance in the near-term. Additionally, GT is focusing on improving its efficiency by focusing on its core business areas. The company is witnessing a favorable selling price environment and product mix, as well as strong volume growth in the North American Tire business. Thus, we reiterate our Buy rating for the stock with a six-month target price of $19.50. What Sell recommendations would you care to mention here? Delphi (DPHIQ) management has a difficult road ahead. Volumes and prices are under pressure due to a weakening automotive market. Delphi’s filing for bankruptcy to restructure its U.S. operations will result in little value for equity holders. Thus, we recommend a Sell with a six-month target price of $0.00. At Dana (DCN), a weak light-vehicle market and soaring raw material costs are influencing earnings. Additionally, downgrading of debt ratings by leading credit rating agencies raise our concern over the stock. As a result, we rate the stock a Sell, with a six-month target stock price of $ 4.25. Finally, we have a Sell on ArvinMeritor (ARM). Production cuts at original equipment manufacturers, rising raw material costs, falling light vehicle sales, increasing interest rates, and the uncertainty associated with the retiree medical expenses raises our concern over the company’s profitability in the near term. As a result, we downgrade our rating on ARM to a Sell, with a target price of $14.50. What’s your outlook on the industry for 2006? Our outlook for the auto and auto parts industry is neutral. We believe the group will track the S&P 500 in 2006. Investors should market-weight auto stocks for the time being. In the next six months, the auto group as a whole could benefit from steady raw material costs. However, we should see earnings that are in-line or slightly below still aggressive expectations. The group is likely to track the S&P in the next six months. We are neutral on this group due to low valuations. The industry is trading at 8-9X EPS, 2-3 times cash flow, and almost at 1X book value. Hence, there is little downside to these stocks. The auto industry is a mature sector. Demand for autos varies between -5% and 5%. In 2006, we expect growth to be 1-2% due to a slowly improving economy. Auto industry sales are affected by mixed trends. Auto industry sales have slowed due to rising interest rates. Rising interest rates affect auto sales because it makes it more expensive to finance an automobile purchase. Furthermore, rising gas prices have resulted in a slowdown in the industry’s star product, the SUV. Imports have also been more competitive due to high gas prices, as they tend to have better gas mileage. Imports currently represent 37% of the auto sales in the U.S. Sales also have been helped by the strong real estate market, as people refinance their homes, take equity out, and buy cars. Hybrid cars represent a source of growth in the future should gas prices remain high. Market share gains will be slow, however, as it is too early to see significant new hybrid rollouts. It takes time to develop and roll out a new car.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. To see their latest posts, click here. Guess?, Inc. (GES) - Good Entry Point. For full Zacks research report, click here. Saks, Inc. (SKS) - Struggles Continue. For full Zacks research report, click here. Pricing Power Continues to Improve Positive Surprises Still Outnumber Disappointments
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: Growth and Income This Growth and Income Strategy is pretty straightforward, yet amazingly profitable. The goal is to find solid companies paying out extraordinary dividends. With money market rates being so low, we think many investors will find appeal in this strategy with minimum dividend yield of 8% plus attractive equity appreciation potential. This screen has the least turnover of any of the Profit Tracks and has shown excellent results with both 12 and 24-week holding periods. Investors who are concerned about too much REIT exposure in this type of strategy need not be worried. Backtesting results show strong returns even when REITs are completely excluded. Nordic American Tanker Shipping Ltd. (NAT) boasts a dividend yield of 22.91%, which is currently the highest yield listed under this Profit Track. The company recently announced fourth-quarter earnings of $1.51 per share, outpacing the consensus estimate by about 4% and exceeding the year-ago quarter. NAT also declared a dividend of $1.88 per share for the fourth quarter. The dividend for the third quarter was 60 cents and last year’s fourth-quarter dividend was $1.62. Continue your research on NAT at: http://at.zacks.com/?id=2254. Southern Copper Corporation (PCU), a Zacks #1 Rank (Strong Buy) company, released fourth-quarter earnings of $2.86 per share in late January, outperforming analysts' expectations by almost 9%. Net sales increased 14.1% year-over-year. The company also declared a dividend of $2.75 per share. PCU satisfies the criteria for this Profit Track with a dividend yield of 13.67%. Continue your research on PCU at: http://at.zacks.com/?id=2255. Saxon Capital Inc. (SAX), a residential mortgage lending and servicing real estate investment trust (REIT), will report its 2005 fourth quarter and year end operating results after the market closes on February 28, 2006. The company paid a fourth-quarter dividend of 50 cents per share plus a special dividend of 14 cents in early January. The special dividend was declared in order to reduce the potential for any excise tax that might be incurred by the Company under REIT tax rules. SAX currently offers a dividend yield of 19.61%. Continue your research on SAX at: http://at.zacks.com/?id=2256. Suburban Propane Partners LP (SPH), a marketer of propane gas, fuel oil and related products and services nationwide, recently paid a dividend of $0.6125 for the fiscal first quarter. The company also posted first-quarter earnings of $1.14 per share in early February. The result was ahead of the consensus estimate by nearly 30% and improved on the previous year’s 77 cents. SPH, which currently yields 8.58%, stated that it is well positioned for significant earnings growth in fiscal 2006. Continue your research on SPH 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Kevin Matras combines some of his winningest strategies to
create a Custom Consensus screen: http://at.zacks.com/?id=2259. 3. ZACKS RANK BUY 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 - Ditech Communications Corporation (DITC) Ditech Communications Corporation (DITC) has met or exceeded earnings estimates for each of the past 16 quarters. Estimates for 2007 increased 23.8% to 26 cents over the past seven days. The stock is currently trading at 40.8x 2007 estimates, compared to the long-term growth rate of 25%, giving DITC a PEG ratio of 1.63. Read the full analysis on DITC at: http://at.zacks.com/?id=2510. Growth & Income - Applied Industrial Technologies, Inc. (AIT) Applied Industrial Technologies, Inc. (AIT) met or exceeded analysts’ earnings expectations in 15 of the past 16 quarters. This Zacks #1 Rank stock recently reported record sales and earnings for the second quarter of fiscal 2006. Furthermore, the company raised its third-quarter and fiscal year 2006 earnings per share guidance. AIT is currently yielding 1.4% and has a five-year average dividend yield of 2.2%. Read the full analysis on AIT at: http://at.zacks.com/?id=2511. More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum - STAMPS.COM (STMP) STAMPS.COM (STMP), a former Dot Com darling, delivered a positive earnings surprise and set new 52-week highs. Read the full analysis on STMP at: http://at.zacks.com/?id=2512. Value - Reliance Steel & Aluminum Co. (RS) Reliance Steel & Aluminum Co. (RS), a stock that we first featured on Dec 14, 2005, recently reported record full-year and fourth-quarter 2005 results. The company continued its winning ways by once again topping analysts’ expectations in the last quarter. RS maintained its Zacks #1 Rank status as a result. Furthermore, on Feb 16, 2006, the company issued first-quarter 2006 earnings per share guidance above analysts' estimates. The company has a price-to-book (P/B) multiple of 2.7. Read the full analysis on RS at: http://at.zacks.com/?id=2513. Zacks Rank Resources
4. FEATURED EXPERTS Here we cast the spotlight on a timely Featured Expert commentary that recently appeared on Zacks.com. According to the World Gold Council’s latest statistics, through mid-2005, Chinese and Indian fast economic growth increased gold jewelry demand to $38 billion. India’s jewelry demand last year was 517.5 tons; China’s 224 tons. Over the next 5 years, Chinese sales can reach Indian levels, with significant potential impact on the world gold market. As more Chinese reach 50 or older, they want to buy precious metals. After 2001, China became the 4th biggest gold consumer market after India, the U.S., and Saudi Arabia. In China, gold jewelry accounts for 96% of the overall gold market. A large-scale survey of Chinese in 10 big cities showed that 80% of them purchase jewelry for decoration and only some 11.1% for storing value. Contrast Japan, where only 20% of gold is bought for decoration or jewelry. After 1949, gold trading was suppressed by central planning for over 50 years. Mao in 1950 turned over the management of gold and silver to the People’s Bank of China. It alone was allowed to purchase precious metals. This froze the popular gold business. In 1963, China furthermore stopped supplying raw gold for making jewelry. Exports of gold and silver were blocked. So the Chinese and gold were separated for almost 40 years. In 1999 China opened the silver market. In 2001, China cancelled the gold fixed rate set by People’s Bank of China, and implemented a weekly market price tracking international markets. In 2002, the People’s Bank of China authorized 4 large banks to perform services to the gold industry: gold spot transactions; gold transaction overview; gold project financing; gold material completion; gold lending and borrowing; gold purchase; and setting up retail gold investment products to sell to Chinese residents. In 2002, the Shanghai Gold Exchange in the Bund China Foreign Currency Trading Center officially started up. On day 1 there were 98 transactions for 540 kilograms, valued at 45.08655 million Yuan ($5.4584 million). A survey showed that 40% of Chinese city families with income over 3,000 Yuan want to buy gold. Collecting gold bars for The Year of the Dog is the new hobby of Chinese. Last year the gold price rose again and again, so gold bars with the Dog symbol sold out in a few days and gold coins sold well. This Jan. 8, “Gold Dog Bring The Wealth”, the Dog New Year’s greeting money bar, was a bestseller, in part because pre-orders were accepted in 2005. Some people have already ordered next year’s pig year New Year’s greeting gold bars. People also buy animal commemorative coins for the year in which they were born. The government tried to stop speculation in gold. It limited New Year’s greeting money bars to 8,000 spindles. For Dog year, the New Year’s greeting gold bar front design says “Gold Dog Bring The Wealth”. The bar is 99.9% pure gold, weight 20 grams; the silver bar front design reads “the God of Wealth” and the quality is 99.9% pure silver, weight 120 grams. Updates on holdings from the Buy and Hold Portfolio: For investors seeking wealth preservation and current income Using the change-of-control clause, Pfizer bought rights to Sanofi’s (SNY) share of their jv to market Exubera inhaled insulin. Price was $1.3 billion. SNY has other insulin drugs in its pipeline. Its antiplatelet agent Plavix has been approved for marketing in Japan for the reduction of recurrence after ischemic cerebrovascular disorder. Sanofi sued Teva (TEVA) in Israeli courts for violating its patent on non-drowsy OTC allergy medication Allegra D. U.S. Food and Drug Administration approved the first generic version of its blood-thinning drug, Plavix, on Tuesday. The generic version is made by Canada based Apotex Inc. Plavix is marketed by Sanofi-Aventis and Bristol-Myers Squibb. Other names in the Buy and Hold Portfolio include: Schlumberger Limited (SLB) is a global technology services company consisting of two business segments, Schlumberger Oilfield Services and SchlumbergerSema. Schlumberger Oilfield Services is the leading provider of exploration and production services, solutions and technology to the international petroleum industry. SchlumbergerSema is a leading information technology services company providing a unique combination of domain expertise and global capabilities delivered on a local basis. Norsk Hydro (NHY) is an industrial company based on the use of natural resources, with the aim of meeting needs for food, energy and materials. Banco De Chile (BCH) is principally engaged in commercial banking in Chile, providing general banking services to a diverse customer base that includes large corporations, small and mid-sized businesses and individuals. Add international diversification to your portfolio with profitable recommendations from Expert Vivian Lewis. With a +49% average return over the last 5 years and 154% portfolio growth in `03, can you afford to miss out? http://at.zacks.com/?id=2449. 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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