Friday - March 3, 2006
 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 Senior IT analyst Larry Orlowski, CFA covers a wide range of technology sectors, but for today we wanted to focus on the software space. Larry has been tracking some changes and developments here recently, so we wanted to get his take on where the strongest software plays are at the present time. What trends are beginning to emerge in the software sector at this time? When following companies, in not only this space but in all of those I cover, one thing I like to do is look for not only trends but also themes. This helps me understand the general environment better, gives more of a general framework, and helps me predict better. So when considering software, I've been looking at the theme of virtualization in the area of business intelligence. And virtualization, the way I see it, can be divided into three parts: the elimination of transaction costs for companies, reducing complexities and providing e-commerce solutions, and developing more efficient business strategies. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Before computers, when you went to the store to buy something, you'd pay your money, get a receipt and take your item - that's it. Now, with computers, every time you make a transaction at a store it's registered. There is always a data point attached to the transaction. When you sign up for a credit card, information is followed in order to see if you have any credit or not. So you always have a data component - actually, sometimes transactions are done completely with data now, such as, for instance, when you purchase antivirus software online just by entering in your MasterCard number. Within these three different sections of business intel software, what types of companies are excelling? In these three areas, I've got three separate companies in mind. Two are Buys and one is a Hold. I don't have any Sells here right now, although I'm starting to get a little bearish on the market overall. But perhaps we can save this and talk about it later. The first company I want to speak about, Cognos (COGN) - which I have a Buy on - is one of my favorites. Even though its revenue only grew 1% year-over-year last quarter, and license revenue actually declined, this was only due to the launch of the company's flagship product, Cognos 8. There are issues involved every time a company brings out a new product, such as getting people on board, especially with a big installation like this one. But Cognos 8 is a key play on virtualization. It is a new software platform with sophisticated time-trending capabilities and event management capabilities, and it generates complex information rapidly. Remember, everything has a data correlate these days - we live in a virtual world. Cognos 8 provides ways to improve business strategies on a corporate level; it can collect all sorts of data, and that data can be mined in all sorts of ways. Companies are then able to improve their strategies by looking for new trends. Beyond business strategies, since Sarbanes-Oxley legislation passed a couple years ago, corporations now have to show in greater detail how decision-making practices and forward- looking projections are done. Therefore, there is a big demand for planning products software, which Cognos also offers. Regulators are able to use these tools to track compliance issues, to get a closer look at what a company is doing. So this type of virtualization comes in many forms and has many uses, and Cognos is a big player in this field. You also mentioned something about e-commerce solutions? Yes. Another play on virtualization is with a different company I've got a Buy recommendation on: Digital River (DRIV). This company provides e-commerce solutions for software publishers and retailers around the world. So DRIV gives companies the technology to deliver software and digital goods online to customers. There are currently 50,000 customers who use these products. Basically, when you've got lots of clients to deliver to seamlessly in a virtual world where so many people are selling software goods online, it's a complex undertaking. The digital delivery market is expected to grow at an annual rate of 25% over the next several years. It's cheaper for software companies to use digital delivery; there's no physical distribution, and no need to pay middlemen for delivery. Conceptually, where COGN uses virtualization to produce better strategies, DRIV uses it to deliver goods in a near-seamless, efficient way. It reduces complexity for customers of digital delivery, and it has lots of different clients. And what about the third segment of virtualization software? Well, Ariba (ARBA) is yet another play on virtualization, even though it is just a Hold now. This company sort of positioned itself as a player that really helped define the enterprise spending management market. Ariba has developed a suite of applications to manage the procurement process, such as when companies want to buy raw materials or do maintenance repair. Especially with huge companies, this type of thing can get pretty complex. With Ariba, you take the platform and obtain timely purchasing information, allowing you to do contracts faster. Because spending requirements of a company using this are already integrated into the software, this helps eliminate transaction costs. The Ariba supply network has 100,000 vendors with which it can connect in real time - many of whom are some of the largest purchasers in the world. With all this information at your disposal, you're going to want to make sense of it so that you can automate and get the best price. This is the third way of looking at virtualization: eliminating these transaction costs are what Ariba brings to the table in terms of virtualization. Why is it you have a Hold on ARBA? That's mostly because it's still in a nascent space. We simply don't know how much it will grow in the next year. Also, it will be facing lots of competitors here: Oracle (ORCL) and SAP (SAP) are really big, and they already provide many of the innards of this type of data processing. And when companies this big get into it, it's easy to see there will be some heavy competition. Also, Ariba's business model is in transition. It used to be more licensed-based, and now it's moving towards subscriptions. When a company has its business model in transition, lots of times there's uncertainty whether that company will be able to meet its numbers. Beyond that, Ariba's got to really prove itself with a superior position and a solution its customers can't get elsewhere. Any final words on the state of software development at this stage? Admittedly, this is just a quick snapshot of the software space. I was trying to be a little conceptual here. Of course, I could have talked about who beat what earnings, what companies are undervalued, and so forth, but I think it's important to have a working model for overall themes that develop. My only hesitation about this group is the same one I've got for IT overall: consumers have kept sales up for the past few years, and companies have lots of money to spend right now. But if companies fear that growth may be slowing, they likely won't be very quick to invest, and we may see an industry downturn. We have seen signs of a pickup in enterprise spending in IT, but one thing we don't know at this time is: how sustainable is it? Lawrence Orlowski, CFA is a senior analyst covering the information technology industry for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. To see the latest posts, click here. Encana Corp. (ECA) - Industry-Leading Inventory. For full Zacks research report, click here. ViroPharma (VPHM) - Risks Potentially Emerging. For full Zacks research report, click here. Zacks Industry Rank for the Week of Feb 27 Earnings Growth Expected to Slow Sharply in the First Quarter
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we highlight... Profit Tracks: Recent Price Strength This screen looks for stocks trading in the upper range of their 52-week highs along with attractive Zacks Rank and Broker Ratings. This strategy proves that the "trend is your friend" with a +35.5% return versus +4.9% for the S&P 500 in 2005. Here are four stocks that make the grade for the Recent Price Strength Profit Track: American Financial Group, Inc. (AFG), a Zacks #1 Rank (Strong Buy) company, announced fourth-quarter core net operating earnings of $1.11 per share, exceeding the consensus estimate by almost 16% and outperforming the year-ago total. Shares of AFG recently established a new 52-week high and have advanced in price by approximately 10% over the past four weeks. Continue your research on AFG at: http://at.zacks.com/?id=2290. Interactive Intelligence Inc. (ININ), a global developer of business communications software and a Zacks #1 Rank (Strong Buy) company, posted fourth-quarter earnings of 10 cents per share, surpassing the consensus estimate by 150% and exceeding the year-ago result of three cents. ININ meets the criteria of this Profit Track with a share price that has experienced about 31% growth over the past four weeks and is currently very close to its 52-week high. Continue your research on ININ at: http://at.zacks.com/?id=2291. Kendle International Inc. (KNDL) a leading, global full- service clinical research organization and another Zacks #1 Rank (Strong Buy) company, recently reported fourth-quarter earnings of 31 cents per share, excluding items, eclipsing the consensus estimate by about 19% and improving on the year- prior performance. Kendle stated that its continued focus on project delivery and operational excellence delivered strong results for its customers and shareholders in 2005. The company's shares are trading near a 52-week high and have advanced in price by nearly 29% over the past four weeks. Continue your research on KNDL at: http://at.zacks.com/?id=2292.Monro Muffler Brake, Inc. (MNRO), a leading provider of automotive undercar repair and tire services, announced record fiscal third-quarter financial results in mid-January. Earnings per share totaled 27 cents, which was nearly 4% ahead of analysts' expectations and above the previous year's total. MNRO is trading near a 52-week high and its share price has increased by almost 7% over the past four weeks. Continue your research on MNRO at: http://at.zacks.com/?id=2293. 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. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Kevin Matras shows you how to find great growth stocks at an
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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 Fed is sending signals that it wants to expand this economy. It has already started pumping liquidity into the system at a very robust rate. Dennis Slothower is watching very carefully the growth of the money supply (M2), and he sees that it has grown by a huge 8% over the past several months. To put this increase in perspective, the last several months have seen the money supply expand in the 2%-3% range. Slothower's trader sense is tingling and telling him the Fed will keep pumping up the money supply this year at a much higher rate than we had seen under previous Fed chief Greenspan. This huge expansion of the money supply will give a big boost to the gross domestic product (GDP). As long as the Fed continues to grow the money supply, the negatives of higher interest rates will be minimal. The benefits of a pumped-up money supply is what is making Slothower very bullish. He doesn't see the Fed reversing course and contracting the money supply until the elections are over, which means get out your bullish hat and watch the stock market move higher. In addition, the core CPI number, which is the measure used for gauging inflation, is moving up ever so slightly. Currently it is increasing by a smidgen, just 0.2%. Since the Fed is not seeing inflationary pressures in the economy, it has little reason to tighten the money supply. With everything pointing to higher stock prices, once again, the only wild card is the price of crude oil and all the geopolitical risks that could very quickly cloud Slothower's rosy forecast. But for now, there is a high probability that stock prices will be higher over the next several months. Oshkosh Truck Corporation (OSK) engineers, manufactures and markets a broad range of specialized trucks, chassis, trailers, and proprietary parts under the Oshkosh trademark. The company's vehicles, manufactured in low to medium production volumes, are engineered for market niches where a unique, innovative design will meet a purchaser's requirements for use in specific, usually adverse operating conditions. Eagle Materials Inc. (EXP) is a Dallas-based company that manufactures and distributes Cement, Gypsum Wallboard, Recycled Paperboard and Concrete and Aggregates. United Rentals, Inc. (URI) is one of North America's largest equipment rental companies with over branches in the majority of states, several Canadian provinces and Mexico. The company offers for rent different types of equipment to customers that include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and others. Amkor Technology, Inc. (AMKR) operates as a subcontractor of semiconductor packaging and test services worldwide. It offers traditional packaging, which includes traditional lead frame products, and advanced packaging, which includes advanced lead frames and laminate products. Amkor's test solutions include wafer probe, final test, strip test, marking, bake, dry pack, and tape and reel. The company offers its services to communications, computing, consumer, industrial, and automotive applications. Amkor Technology was founded in 1968 and is headquartered in West Chester, Pennsylvania. Kulicke & Soffa Industries, Inc. (KLIC) engages in the design, manufacture, and marketing of capital equipment, packaging materials, and test interconnect products and services; and maintain, repair, and upgrade equipment to assemble and/or test semiconductor devices. The company operates in three segments: equipment, packaging materials, and test interconnect solutions. The company was founded in 1951 and is based in Willow Grove, Pennsylvania. During my 25-year career as a money manager, I've tested
hundreds of market indicators. I've fine-tuned my strategy
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I'm convinced will be a spectacular bull market. http://at.zacks.com/?id=2366. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - b) Moving in Opposite Directions Bill Martin is going to hold tight onto James River Coal and Massey Energy. Learn why and receive updates on each. More... c) Bear Trap Gregory Spear defines the phrase "bear trap" as it relates to traders and highlights a few tech names. 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 |
|---|---|---|
| WESTELL TECH | WSTL | 5.13% |
| MAXWELL TECH | MXWL | 2.42% |
| STEIN MART I | SMRT | 2.82% |
| SYNAPTICS IN | SYNA | 2.35% |
| HAVERTY FURN | HVT | 2.14% |
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