Tuesday - June 20, 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 Last week, three of the largest investment banking firms reported fiscal second-quarter results: Lehman Brothers (LEH), Goldman Sachs (GS) and Bear Stearns (BSC). The results topped expectations, but the prices of the three stocks ended the week slightly down after some modest volatility. There was not a single explanation as to why. LEH topped estimates by nine cents with profits of $1.69 per share. The results were six cents below the blowout first-quarter numbers, however, which sparked some concern among investors. Other traders wanted to see what Goldman was going to report the following day. GS topped expectations by 62 cents with profits of $4.78 per share. The quality of earnings were questioned somewhat because of a one-time sale of a power generation facility that resulted in a $700 million gain. BSC said on Thursday that it generated profits of $3.72 per share, 62 cents above expectations. The overall state of the equity markets played a role. Stocks were down early last week before rallying on Wednesday and Thursday. LEH and GS reported on down days, while BSC was lucky enough report in the middle of a two-day, 300-point rally. The inability Lehman and Goldman Sachs to top extremely strong first-quarter results caused a bit of disgruntlement. There were also worries about the impact that market volatility and rising interest rates would have on the investing banking sector as a whole.More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - On the other hand, earnings estimates for all three firms were raised for this year and next – a very bullish sign in the face of lackluster price action. The latest consensus forecast for LEH calls for fiscal 2006 earnings of $6.46 per share and fiscal 2007 earnings of $6.71. These estimates represent one-week increases of three cents for both forecasts. In regards to GS, the consensus estimates are $16.67 for fiscal 2006 and $16.07 for fiscal 2007. These new projections represent increases of 39 cents and 20 cents, respectively. Estimates for BSC now stand at $12.78 for fiscal 2006 and $13.38 for fiscal 2007, representing increases of 13 cents and 17 cents, respectively. Astute investors will notice that the revisions do not fully reflect the magnitude of the fiscal second-quarter surprises. This is partially due to the fact that not all of the covering analysts have adjusted their forecasts. Consensus estimates for both the third and fourth quarters have been ratcheted up, however, implying that analysts expect the positive earnings momentum to continue. Second quarter earnings season does not officially kick off until July 10, when Alcoa (AA) is expected to report. One analyst raised his forecast on the aluminum company last week. The recent change and two other positive revisions within the past 30 days have caused the quarterly estimate to rise by a cumulative three cents to 80 cents per share. Alcoa belongs to the Mining-Non Ferrous group, which has a Zacks Industry Rank of 1.57. Another company with recent revisions in estimates is CSX Corporation (CSX), a Zacks #1 Rank stock. Two of the 10 covering analysts have raised their quarterly and full-year estimates over the past 30 days, with one analyst adjusting his estimate within the past seven days. The current second-quarter forecast calls for profits of $1.12 per share – a penny above the month-old estimate. The current full-year forecast calls for profits of $4.34 per share, five cents above the month-old estimate. CSX belongs to the Transportation-Rail group, which has a Zacks Industry Rank of 2.30. This group also contains five Zacks #2 Rank stocks: Canadian National Railway (CNI), Florida East Coast Industries (FLA), Genesee & Wyoming (GWR), Kansas City Southern (KSU) and Union Pacific (UNP). As I have stated previously, the railroads are benefiting from both sustained economic expansion and high energy prices. Elevated fuel prices have resulted in a shift of market share from trucks to rail. Ethanol and coal are also helping the rail industry. On Friday afternoon, UNP issued a press release stating that it set a new all-time record for carloadings in a seven-day period. This was the first-time that the company has set such a record outside of its peak season. UNP is handling a 57% increase in ethanol shipments and is experiencing record coal volumes. Read the complete INDUSTRY OUTLOOK at: http://at.zacks.com/?id=2379. Charles Rotblut, CFA is a senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog - NEW! Get real-time market insights from Zacks Equity Research Analysts. To see their latest posts, click here. The TriZetto Group (TZIX) - Attractive Valuation. For full Zacks research report, click here. Bandag, Inc. (BDG) - Competition Increases For full Zacks research report, click here. Certain Non-U.S. Banks Tumble Earnings Trends
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: Return on Equity This Profit Track strategy uses Return on Equity (ROE) to discover solid stocks. ROE is one of the quickest ways to gauge whether a company is creating assets or gobbling up investors' cash. This fast moving Profit Track returned an impressive +19.1% in 2005. Century Aluminum Co. (CENX) released first-quarter results in early May, noting that revenues of $347 million and operating income of $64 million were at record levels. CENX added that strong incremental profit was realized on the higher level of revenue. Last year’ first-quarter sales totaled $285 million. Century Aluminum is generating healthy income on invested capital as evidenced by its ROE of 32.77. Continue your research on CENX at : http://at.zacks.com/?id=2389. Freescale Semiconductor, Inc. (FSL) meets the criteria of this Profit Track with a ROE of 15.20 and a price to sales ratio of 0.64. The company posted its financial results for the first quarter in mid-April. Earnings per share surpassed analysts' expectations by about 17% and outperformed the previous year's first quarter. Net sales totaled $1.53 billion versus $1.44 billion for year-prior quarter. Continue your research on FSL at: http://at.zacks.com/?id=2390. Holly Corp. (HOC) may be appealing to value investors with its price to sales ratio of 0.69. In early May, the company reported first-quarter results, stating that its income from continuing operations was at a record first quarter level, and it generated $53.2 million of earnings before interest, taxes and depreciation ("EBITDA") for the quarter, which compares very favorably to the 2005 first quarter. HOC’s ROE is 48.57. Continue your research on HOC at: http://at.zacks.com/?id=2391. WESCO International, Inc. (WCC), which has a ROE of 30.99 and a price to sales ratio of 0.62, announced first-quarter earnings of 86 cents per share in mid-April. The result topped the consensus estimate by nearly 23% and improved year-over-year. The company said record results were achieved in key performance areas, driven by the continuous improvement mentality that has become a cornerstone of its culture. Results for the second quarter will be available on July 20, 2006. Continue your research on WCC 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Minimizing Market Risk and Volatility with ‘Beta’ Kevin Matras looks at how to minimize your portfolio's market risk and volatility by using the ‘beta’ measure: 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. Free Online Options Research at: http://at.zacks.com/?id=2664. Zacks/Schaeffer’s Options Trading service at: http://at.zacks.com/?id=2665. Last week we used the High Open Interest Put Filter and determined that a bullish play on General Motors (GM) looked good. Today we want to look at the other side of this filter and find a bearish play using the High Open Interest Call Filter. Before we 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 has done so already. However, 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. So what exactly is the High Open Interest Call filter? First off, let’s look at what a call is. Calls are simply a bet that the underlying stock is going to move higher. From our contrarian point of view, a large number of calls accumulated at a certain strike just above the stock's current level is a sign of potential options-related resistance. I won't get into too much detail on this, but the reasoning is based on how the market makers are hedged. The bottom line is this: large numbers of calls at a certain strike have the potential to serve as a solid level of resistance. One more very important item we must touch upon regarding this filter is that the majority of the stocks it suggests are likely to be the big names that have lots of activity, such as the Nasdaq 100-Trust (QQQQ), the Spyders (SPY), or Microsoft (MSFT) . These big names don't take away from the importance of this filter; they are just something to keep in mind. Looking at the list from Thursday, one name that stood out to us was Cisco Systems (CSCO). This one made the list a few different times thanks to open call interest at the 20 and 22.50 strikes. Technically, the shares completed a picture perfect double top in early May and since that time they’ve been in a slow steady decline. We like the way this picture looks as the share’s 50-day moving average is now pointing lower, suggesting the path of least resistance is lower. Also, on a weekly chart, the 10- and 20-week moving averages are about to have a bearish cross – again suggesting this one is fighting an uphill battle to go higher. Let's turn to a few sentiment indicators that we like to use. Remember, we're looking for optimism in the face of under-performance as a sign that most of the money that wants to move in and buy, probably already has. Thus, more weakness is a high probability. One such indicator we like to use is the Schaeffer's put/call open interest ratio (SOIR). This ratio shows how many bearish puts there are compared with bullish calls among near-term options. Currently, CSCO’s SOIR checks in at 0.41. That's all fine and dandy, but it only matters when you compare it to the other readings taken over the past year. Such comparison reveals that this number is lower than 71% of the readings taken during the past 12 months, suggesting short-term options players are pretty optimistic – exactly what we want to see. Shorting a stock means that you are selling it with the intention of buying it back later at a lower cost. In other words, you are betting that the shares will go down. We love to see a lack of short sellers betting against the shares, as this reduces the odds of a short-covering rally on any good news. Turning back to CSCO, we find that it would take less than a day for all of the shorts to cover and less than 1% of the float is sold short. These numbers show us that nearly no one is betting against CSCO. Another good way to get a gauge of sentiment is to look at what analysts think. Given that the shares have been lagging recently, optimistic analysts leave the door open to some downgrades. According to Zacks, there are 20 "buys," six "holds," and only one “sell”. Should the shares continue to underperform this will leave lots of room for downgrades from this group. Add it all up and this one very well might be going lower over the intermediate-term. Write it down and let’s see how it does, but should the market continue to fall this summer, we expect CSCO to continue to underperform. Please continue to use all of the filters on these pages for more money-making ideas and don't be afraid to make a few paper trades to see what strategy works best for you. But please remember that when it comes to options, the majority of your trades are going to be losers. Don't get discouraged, because that's the beauty of the leverage that options provide. It takes only a few winners out of every 10 trades to make you a very happy investor. Good luck! To learn more about the High Open Interest filter, click here: http://at.zacks.com/?id=799. Discover all the tools and commentary available from the Zacks.com Options Center at: http://at.zacks.com/?id=2382. Leverage the timeliness of Zacks #1 Ranked stocks with options trades that maximize profits and minimize risks. Learn more about our new Options Trading service at: http://at.zacks.com/?id=2666. 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 – Gardner Denver, Inc. (GDI) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum – Allegheny Technologies (ATI) Allegheny Technologies (ATI). It’s been an interesting ride for ATI since it was our featured Momentum stock on Jan 31. Currently ATI is about 24% above the price on Jan 31, a nice gain for Momentum investors, to be sure. But the stock has fallen 26% from its May 11 high of $87.50. Should Momentum traders stay with this stock? A number of factors say yes. ATI announce this past week that it was raising prices on a number of its products. The stock has recovered about 18% from the low of the move on Jun 8. Finally, the stock continues to trade above its 200-day moving average, an indication that the trend remains up. Read the full analysis on ATI at: http://at.zacks.com/?id=2496. ING Group (ING) recently announced its plans to consolidate its life, accident and disability units to better serve its customer base. "This new structure enables us to provide service on a customer-focused basis as opposed to a product line basis," said Scott Machut, Vice President and Head of Life, Accident and Disability Reinsurance. Analysts' earnings estimates have been trending higher for this year and next year for this Zacks #1 Rank stock. Read the full analysis on ING at: http://at.zacks.com/?id=2497.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Zacks Rank #1 and #5 Additions Zacks #1 Rank List: 38 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: 43 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 05/24/2013
| Company Name | Symbol | %Change |
|---|---|---|
| GENTIUM SPA | GENT | 2.47% |
| MENTOR GRAPH | MENT | 2.10% |
| INFORMATION | III | 2.09% |
| AMER NATL BK | AMNB | 1.99% |
| BARRETT BUSI | BBSI | 1.93% |
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