Wednesday - June 7, 2006
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2319. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH As the homebuilding market continues to slowly recede from its January highs, we felt it would be a good time to check in with senior homebuilding analyst Mario Ricchio. What trends is he seeing in this group going forward? Are homebuilding companies beginning to proceed with caution with regard to the current housing market? Yes they are. After record housing starts in January, the homebuilding industry reported a third consecutive month of slower construction activity in April. The homebuilders are finally responding to rising inventory levels and moderating demand with less supply. In April, housing starts fell 7% on a sequential basis and 11% on a y-o-y basis. More importantly, the latest data on permits suggests the homebuilders remain cautious for the seasonally strong spring and summer selling season. Building permits, an indicator of future construction, fell 8% on a y-o-y basis to 1.98 million units. Supply has fallen almost 240,000 units from January’s data, in which housing permits reflected an annual pace of 2.22 million units. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Given continued high home inventory levels and moderating home demand, we believe permits are likely to fall for at least the next six months to bring supply back in balance with demand. Despite the decline in housing starts in March and April, the number of unsold homes at the end of March hit a record 3.19 million units. At the pace of current sales demand, it would take 5.5 months to eliminate the backlog of unsold homes—the longest period since 5.6 months in July of 1998. We expect the April figure to creep up to 5.7 months as demand weakens further. Slower demand is affecting both low-end and high-end builders. Just recently, Toll Brothers (TOL) warned that signed contracts for its homes fell 29% during the second quarter and home deliveries would be 200 units lower than the street expected. Also, Standard Pacific (SPF) lowered its full-year earnings guidance in July thanks in part to a 41% decline in net new home orders for the first two months of the second quarter. Orders fell on the back of an increased cancellation rate and continued demand weakness in Southern California and Northern California, Florida and Arizona. With the recent rise in mortgage rates and drop in affordability, the homebuilders may not be able to push all this supply through the market. We are already seeing an inventory glut forming in the growing number of new homes unsold on the market. There are over 128,000 unsold homes completed and ready for move-in, the highest level in history. The inventory for existing homes could also worsen as over $2 trillion worth of ARM’s reset higher in 2006 and 2007. In 2003, a bevy of homeowners purchased a home by taking advantage of teaser rates as low as 4%. The problem is that the interest rate on this typical three-year ARM could reset to 6% in 2006 and 7% in 2007. The higher mortgage payment may lead some overstretched owners to default on payments, adding supply to an already glutted market. The other potential source of hidden inventory comes from investors selling second properties and refraining from buying new properties. With diminishing prospects for home appreciation, we believe the cost to carry a speculative property outweighs the potential for equity accumulation. And remember, by some estimates, sales of second homes totaled 40% of new home sales in 2005. Thus, if investors fail to buy second and third homes in the second half of 2006 and in 2007 for lack of affordability and price appreciation potential, new home sales will plunge and send inventories soaring. With home inventories likely to rise from current levels, the big risk is that the builders resort to incentives to drive sales growth. As incentive use increases and price cuts appear, we expect a negative impact on industrywide gross margins. We believe the residential real estate market is on the cusp of a major transition from a sellers' market to a buyers' market. In this new reality, the risk is that of a price decline. Buyers hold the bargaining power and can balk at higher prices with homes sitting on market for longer periods of time. In our view, the markets most susceptible to price decline are San Diego, Las Vegas and Miami. Will it be worse for condos or for single-family houses? Investors, or speculators, tend to gravitate towards the condo market more than the single-family home market. This makes the price decline potentially worse for condos as speculators begin to sell properties en masse. In the year 2005, investors accounted for more than 25% of purchases in Las Vegas, Phoenix, Orlando, Miami, and San Diego. In these same markets, we see the greatest risk of price decline as speculators dump properties. To read the complete Analysts Interview, click: http://at.zacks.com/?id=2525. Mario Ricchio is a senior analyst covering the homebuilding sector for Zacks Equity Research. . - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. To see their latest posts, click here. Cutera, Inc. (CUTR) - Much Improved Visibility. For full Zacks research report, click here. Kimberly-Clark (KMB) - Costs and Myriad Pressures. For full Zacks research report, click here. Zacks Industry Rank for the Week of Jun 5 Earnings Still Strong
2. SCREEN OF THE WEEK Zacks.com offers three unique weekly commentaries that all
further our mission to help you Profit from the Pros. Today is
the latest installment of Screen of the Week from Kevin Matras.
Each week, Kevin shares with you another winning screen he has
discovered using the Research Wizard software from Zacks
Investment Research. Learn more about the Research Wizard at: http://at.zacks.com/?id=2335. “Pulling Profits and Cutting Losses” Last month, I published a screen to find winning stocks with upward price momentum amid heavier trading activity (bullish). (Primarily, it looks for stocks that have increased each day for the last three days with an increase in the accompanying volume.) This week, I want to revisit this idea, but with a different spin. I’m talking about using price and volume to know when to pull profits and cut your losses. Look at your stocks. Are they moving convincingly higher on growing volume? Or are they marking higher prices on diminishing volume? (Or are your stocks moving lower on increased volume? If this is the case, keep reading as this will be covered too.) This is important since volume is supposed to follow price. If the stocks on your radar are moving higher, but without greater investor interest, it can often mean a pullback is in the near offing. (Or if it’s moving lower as volume increases, it could signal there’s more downside to come as people are exiting their long positions or even getting short.) An analogy that someone told me illustrates this clearly. Imagine you have a water hose and a ball. If you placed the ball on top of the water hose and sprayed it upwards, the ball would be lifted by the stream. The more water pressure you give it, the higher the ball will go. But once you start easing up on the water pressure, the ball will stop moving higher and eventually start falling as the water pressure diminishes. And that’s what happens with stocks too. The more buying pressure there is, the higher it’ll go. But once the buying pressure eases up, it often means a pullback is in store. The pullback can be an ordinary retracement as new buyers catch their breath or it could be a trend-changing event. As for downside pressure, it’s pretty much the same thing. Wherever the pressure is (volume), prices have a tendency to follow. So pay attention to what the volume is telling you and be alert. A screen for helping you weed out the weak from the strong can be as simple as looking for three days (or more) of higher prices with each day registering less buying pressure (lower volume). The parameters are: Recent Price > Price 1 Day Ago (Recent > Recent-1D) Recent Volume < Volume 1 Day Ago (Recent < Recent-1D) Here are two that fit this criteria (for the week of 6/5/06);
(This screen is available in the Research Wizard. The name of the screen is called; sow_3days up pr and 3 dwn vol) There are many more stocks that appear on that list too. If your stocks show up on it, pay close attention. They could be in store for a direction change. You can also look for three days down (or unchanged) with increasing volume. Lots of action with no upside progress can often be a sign of distribution (people selling off their stock), or people getting short. The parameters are: Recent Price <= Price 1 Day Ago (Recent <= Recent-1D) Recent Volume > Volume 1 Day Ago (Recent > Recent-1D) Here are two that fit this example (for the week of 6/5/06);
(This screen is also available in the Research Wizard. The name of the screen is called; sow_3days dwn pr and 3 up vol) You may even want to check for stocks with big price drops on much larger than average volume. If the price falls by 8%, for instance, on 20% more volume than average, that can also be a signal that things may be changing. Again, since volume in general should follow the price, a big price drop on increasing volume could be foreshadowing even lower prices to come. The parameters are: Recent Price < -8% from Price 1 Day Ago (Recent < .92* Recent-1D) Recent Daily Volume >= 1.2x (20%) 20 Day Average Volume Such as: (for the week of 6/5/06);
(This strategy is easy to create in the Research Wizard.) There are many other ways to use price and volume as an indicator of a stock’s future direction. But by simply applying these screens to your stocks, you could keep yourself out of ‘suckers rallies’, exit major tops sooner, lock in hard earned profits, or exit losers before they get bigger. These strategies and many more come loaded with the program. See for yourself and put your own stocks to the test. So sign up now you’re your free trial to the Research Wizard and pick and choose from some of our profitable strategies or put your own ideas to the test and start making better decisions today. http://at.zacks.com/?id=2335 Discover all the Free Screening Tools on Zacks.com at: http://at.zacks.com/?id=2336. Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. 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 – Huron Consulting Group, Inc. (HURN) Huron Consulting Group, Inc. (HURN) has met or exceeded earnings estimates for six consecutive quarters. Four analysts have raised their numbers for 2006, while one has done so for 2007. This year's estimates have increased 7% to $1.37 over the past 60 days. Next year's estimates have risen 8.8% over the same time period. The company sports a return-on-equity of 27%, above the industry average of 22%. Read the full analysis on HURN at: http://at.zacks.com/?id=2498. Growth & Income – Credit Suisse Group (CSR) Credit Suisse Group (CSR) recently announced that all segments reported improved earnings in the first quarter relative to the prior-year period. Earnings per share are projected to grow 18.6% over the next 3-5 years. Analysts’ profit forecasts have been trending higher for this year and next. The company is currently yielding 1.7% and has a five-year average dividend yield of 2.1%. Read the full analysis on CSR at: http://at.zacks.com/?id=2499. More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum – Belden CDT (BDC) Belden CDT (BDC) sets new highs, weeks after a positive earnings report. On Apr 27, BDC reported earnings of 35 cents per share, representing a 75% increase over last year and a 30% positive earnings surprise. Sales were $322 million, down 4.7% from last year. Income was also down 11.5% to $16.64 million as compared to the year-earlier period. Read the full analysis on BDC at: http://at.zacks.com/?id=2500. Value – The Allstate Corporation (ALL) The Allstate Corporation (ALL), a Zacks #1 Rank stock, recently topped the Street’s earnings estimate by 27.7% when it posted first-quarter profits of $2.12 per share. Furthermore, the company recently upped its full-year 2006 earnings guidance. Analysts’ profit forecasts have been trending higher for this year and next. The company is currently trading at a discounted valuation, with a price-to-book ratio of 1.7. Read the full analysis on ALL at: http://at.zacks.com/?id=2501.
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.
History suggests that shares of steady growers outperform in good times and bad, and recent market volatility could further enhance the appeal of stocks supported by rock-solid fundamentals. To that end, Richard Moroney and his team screened for companies with especially strong fundamentals. Factors particularly useful for identifying high-quality growers include:
Hello, I’m Richard Moroney, Editor of Upside and creator of the Quadrix Stock Rating System. In February 1999, I began using Quadrix to serve as a first screen to identify stocks with winning potential. Over the past few years, this system has proven to work significantly well with smaller stocks and has proceeded to gain 240.1% while the Russell 2000 Index gained only 36.3%. http://at.zacks.com/?id=2537 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - b) Bargain Bin Nadine Wong says investors should consider establishing or adding to positions in biotechs: More... c) It’s the Bounce that Counts Jack Schannep says the recent pullback can be constructive, while at the same time be distressing. Discover what he means. 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 (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=2332. Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=2279. 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 06/18/2013
| Company Name | Symbol | %Change |
|---|---|---|
| STAAR SURGIC | STAA | 10.98% |
| DTS INC | DTSI | 6.89% |
| ANIKA THERAP | ANIK | 6.04% |
| LUMOS NETWOR | LMOS | 5.70% |
| INSTEEL IND | IIIN | 5.28% |
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