Tuesday - February 28, 2006
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2372. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH There is an old adverb that says the stock markets climb a wall of worry. The wall presently is becoming decorated with fears of inflation. More specifically, worries that the fed will continue to hike rates in an effort to contain inflation. Certainly, having two Fed Chairman raise the possibility of further interest rate hikes is reason to take notice. Zacks Equity Research is predicting Core CPI growth of 2.3% for 2006 and 2007. Such an increase is modest and would not provide any shock to the economy. Conversely, this modest rate of inflation could provide a boost to corporate profits. The reason is pricing power. Pricing power is the ability of a company to charge its customers more for products and services. The more pricing power a company has, the more likely that its profits will improve. This is particularly the case if price increases reflect more than simply higher costs for raw materials. Pricing power most often occurs during times of economic expansion. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Machinery-Construction/Mining is a group that is both enjoying pricing power and is poised to benefit from a continuation of economic growth. The group has one Zacks #2 Rank and two Zacks #2 Rank stocks that have exceeded fourth-quarter expectations – JLG Industries (JLG), Caterpillar (CAT) and Bucyrus International (BUCY). JLG, which reported last week, credited price increases for contributing to its record revenues. Analysts have upwardly revised their forecasts for 2006 profits on all three companies. CAT is enjoying increased demand for its products because of higher commodity prices (translates into more investment in mines and mining products), regulations calling for eco-friendly truck engines and higher energy prices which have boosted sales of engines for drilling and compression and gas-powered turbines. BUCY, which makes equipment for surface mining, is seeing sales rise for both new machine equipment and aftermarket equipment. The company’s backlog is up nearly 20% from a year ago. Another group with companies that appear to be enjoying pricing power is Building Products-Retail/Wholesale. Although Home Depot (HD) and Lowes (LOW) are certainly household names, investors may want to take notice of two smaller companies – Beacon Roofing Supply (BECN) and Builders Firstsource (BLDR). Both companies recently reported strong quarterly results, topping per share earnings expectations by eight and 11 cents, respectively. BECN said it enjoyed “improved pricing” in some of its markets, although, investors should be aware that the addition of a lower-margin product line did cause overall gross margins to tighten. Nonetheless, two of the four analysts covering this stock have raised their forecasts for fiscal 2006, causing the consensus estimate to increase 8% to $1.51 per share. BLDR enjoyed wider gross margins on all of its product categories, except for lumber and lumber sheet goods. The company did credit higher lumber prices for contributing to its strong fourth quarter, however. Estimates for 2006 profits were rising prior to last week’s earnings report and one analyst has already revised his forecast since the release of fourth-quarter earnings. The new consensus estimate calls for profits of $2.54 per share. Although not every company in the Zacks Rank universe1 is enjoying pricing power, fourth-quarter earnings, in aggregate, are exceeding expectations. Out of the 2723 companies that have reported, 2.2 have topped expectations for every company that has missed. The ratio of revenue surprises to misses2 is 1.4-1. The trend in earnings estimate revisions for 2006 improved last week. Analysts have raised estimates on 1626 companies and lowered estimates on 1767 companies. The average revision3 was -0.5%, versus -0.8% last week. Analysts project the average company4 to grow profits 12.6% this year. A complete listing of the Zacks Sector Rank and Industry Rank scores is presented in the tables below. Sector Rank is calculated by averaging the Zacks Rank for all of the industries within a given sector. Industry Rank is calculated by averaging the Zacks Rank for all covered companies within a given industry. Read the complete Industry Outlook at: http://at.zacks.com/?id=2379. Charles Rotblut, CFA, is a senior market analyst for Zacks.com. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. To see their latest posts, click here. NovaMed (NOV) - A Play on Emerging Healthcare Services. For full Zacks research report, click here. Cerus Corp. (CERS) - Resources Stretched Thin. For full Zacks research report, click here. Super-Major Oil Companies Help Fuel Alternatives Earnings Growth Expected to Slow Sharply in the First Quarter
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... 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. Let’s take a closer look. A company with a P/E Ratio of 20 and a Growth Rate of 10% will have a PEG Ratio of 2.0 (20 / 10 = 2.0). While a company with a P/E Ratio of 40 and a Growth Rate of 50% will have a PEG Ratio of only 0.8 ( 40 / 50 = 0.8) The stock with the P/E of 40 is actually the better bargain since its PEG Ratio is lower (0.8) implying it’s undervalued with more upside potential. In general, a PEG value of less than 1 is considered undervalued while greater than 1 is thought to be fully valued to overvalued. The lower the PEG, the better the value, because the investor would be paying less for each unit of earnings growth. Using this indicator in a stock screening strategy can produce stellar profits, such as a +38.9% return in 2004 and 16.3% in 2005. Ceradyne, Inc. (CRDN), which sports a PEG ratio of 0.55, will report fourth-quarter financial results on Feb 28. In late October, CRDN posted third-quarter earnings of 53 cents per share, outpacing the consensus estimate by 6% and exceeding the year-ago total. The company develops, manufactures and markets advanced technical ceramic products and components for industrial, defense, consumer and microwave applications. Continue your research on CRDN at: http://at.zacks.com/?id=2389. Maverick Tube Corp. (MVK), a Zacks #1 Rank (Strong Buy) name, has a PEG ratio of 0.50. The company recently released fourth-quarter earnings of $1.54 per share, topping the consensus estimate by about 14% and surpassing last year’s result. The company stated that it expects drilling and workover activity in 2006 to continue to increase in the markets it serves. Continue your research on MVK at: http://at.zacks.com/?id=2390. True Religion Apparel Inc. (TRLG) meets the criteria of this Profit Tracks with an impressive PEG ratio of 0.32. For its third-quarter report, which was released in early November, the company announced earnings of 33 cents per share. The result topped analysts’ expectations by 10% and outperformed the previous year’s earnings. Net sales grew from $7.4 million to $35 million year-over-year. Continue your research on TRLG at: http://at.zacks.com/?id=2391. Unit Corporation (UNT) offers an appealing valuation as evidenced by its PEG ratio of 0.15, which is currently the lowest PEG figure listed under this Profit Track. The company recently posted fourth-quarter earnings of $1.82 per share, improving on last year’s 65 cents and jumping ahead of the consensus estimate by approximately 15%. UNT noted that both fourth quarter and full-year 2005 revenue, net income and earnings per share are all-time records. Continue your research on UNT at: http://at.zacks.com/?id=2392. To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=2393. 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=2394 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Kevin Matras outlines a strategy for how to trade the Zacks
Rank in a very practical manner for almost anyone's portfolio: http://at.zacks.com/?id=2395. 3. OPTIONS CENTER Zacks has partnered with the leading options experts, Schaeffer's Investment Research, to provide you the best options commentary, research, and trading tools on the market today. The past two weeks we've looked at the High Open Interest filter for both calls and puts. This week we want to take a look at a similar filter – the Unusually High Option Volume filter for puts. Before we can go any further, we want to talk briefly about our methodology here at Schaeffer's. We are contrarian-based investors, meaning that we want to see skepticism toward an outperformer as a sign that money is still on the sidelines. Conversely, we want to see optimism toward an underperformer. We view too much optimism as a potential sign that nearly everyone who wants to invest in a particular stock already has. Now, just because a stock sees substantial optimism doesn't mean that we will blindly short a particular security; we need to see some negative price action or a major catalyst for a downside move in order to pull the trigger in most cases. Other indicators that we tend to utilize in measuring overall sentiment include put/call ratios, short interest, magazine cover stories, media comments, and analyst ratings. Looking at the list from Friday one name stood out and that was biotech Vertex Pharmaceuticals (VRTX). Few sectors have been hotter than biotech recently and that is what got it on my radar. Just take a look at the AMEX Biotechnology Index (BTK) to see how strong this sector is. Turning back to VRTX, we see it had over 9,000 puts trade on Thursday. This amounts to nearly nine times its average daily put volume. What’s a put you ask? Well to keep this simple, it’s a bet that the underlying security will go lower. So from our contrarian point of view we want to see lot’s of bearish puts trade, but the stock to go higher. Technically, VRTX is a true winner, as the shares are up over nearly 200-percent since their June bottom. You won’t find many charts quite that pretty. But what about the quantitative sentiment you ask? Well, it looks like there’s a lot of pessimism – exactly what we want to see. One indicator that we like to use to measure sentiment is the Schaeffer's put/call open interest ratio (SOIR). This ratio shows how many bearish puts there are compared to bullish calls for the front three months of options. Currently, VRTX’s SOIR checks in at 0.94. That's all fine and dandy, but it only matters when you compare it to the other readings taken during the past year. Doing this indicates that this reading is higher than 71 percent of the readings over the past 12 months, suggesting short-term option players are bearish. Another area worth looking at is what the shorts are doing. Remember to short a stock means you are betting it’ll go lower and you sell it first before buying it back at a lower price. So for a bullish pick we like to see a big build up of bearish shorts, as this could lead to a short covering rally should the shares continue to gain. The flip side we for a bearish play we like to see a dearth of shorts, suggesting no one is bearish. Turns out the shorts don’t think VRTX can keep on going higher, as it would take nearly seven days for them to cover all of their bearish bets. Additionally, almost 10 percent of the firm’s float is sold short – more than enough to spark a short covering rally on any good news. Finally, according to Zacks, analysts are reasonably bearish as well, as there are currently 6 “buys”, eight “holds”, and one “sell”. Given the amazing returns, this leaves the door wide open for some deserved upgrades. So we have a stock that is technically very strong, in a great sector, and the overwhelming sentiment is bearish. Looks like a great play according to our contrarian methodology. With that said, we'd recommend playing calls on VRTX. The July 45 call (VQRGI) for $5.20 looks good. It was trading there on Friday afternoon. We'll be back next week to take a look at the other side of this filter but using calls. Visit SchaeffersResearch.com for more detailed commentaries and enhanced filters to build your portfolio. Also be sure to visit Zacks.com's Option Center brought to you by Schaeffer Investment Research to follow up on this filter and more. Continue to use all of the filters on these pages and try to find out which one's work best for you. Remember; don't be afraid to paper trade a few here and there, as this is a great way to learn. Finally, options are highly leveraged vehicles, and the odds favor that most of your trades are going to be losers. But, thanks to this high leverage, all it takes are a few winners here and there to be more than profitable. Keep on using the filters and good luck! To learn more about the High Open Interest filter, click here. Discover all the tools and commentary available from the Zacks.com Options Center at: http://at.zacks.com/?id=2382. 4. 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) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum - Aspen Technology Inc. (AZPN) Of the 42 stocks that have been highlighted as a Zacks #1 Rank Momentum Stock of the Day since this column began on Dec 12, 2005, nearly a third (13 of 42) continued to make new 52-week highs this last week. In particular, ASPEN TECHNOLOGY (AZPN), first recommended on Feb 14, 2006 has been on a tear, setting new 52-week highs every day last week. Read the full analysis on AZPN at: http://at.zacks.com/?id=2496. By lifting its full-year 2005 profit guidance, coupled with a price-to-book ratio of 2.4, Steven Madden, Ltd. (SHOO) was one of four Value Zacks Rank Buy Stocks featured last week. Read the full analysis on SHOO at: http://at.zacks.com/?id=2497.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Zacks Rank #1 and #5 Additions Zacks #1 Rank List: 51 New Additions (alpha by ticker)
To see the full list of Zacks #1 Ranked stocks (approximately 220 stocks), then click here. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Zacks #5 Rank List: 38 New Additions (alpha by ticker)
To see the full list of Zacks #5 Ranked stocks (approximately 220 stocks), then click here. 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=2385. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=2383. 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=2386. 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 05/22/2013
| Company Name | Symbol | %Change |
|---|---|---|
| ALLIANCE FIB | AFOP | 14.37% |
| TRI TECH HOL | TRIT | 8.82% |
| A M R CP | AAMRQ | 7.91% |
| SONIC FOUNDR | SOFO | 6.56% |
| NOAH HOLDING | NOAH | 6.54% |
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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.
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