Tuesday - July 11, 2006

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Over the weekend, we launched a redesigned Zacks.com and a new service, Zacks Premium. Included in Zacks Premium are professional strength industry analysis tools, such as the interactive Zacks Industry Rank List.

The Zacks Industry Rank List now allows Zacks Premium and ZacksAdvisor.com subscribers to research stocks in specific industry groups with just a few mouse clicks. (The calculation for the Zacks Industry Rank has not changed.).

The new list has two new columns: Rank and 1-Week Change. These columns provide a numerical frame of reference for how a group’s Industry Rank compares to the Industry Rank for all other industry groups. For instance, Textile-Products has the best Industry Rank of 1.50 out of all 208 industry groups and therefore appears in the top spot.

More. . .

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Zacks Equity Research continued...

Because Industry Rank is the average Zacks Rank of all stocks within a specific group, industries with fewer stocks will often appear above groups with a larger number of stocks.

For instance, Engines-Internal Combustion has just one stock: Cummins (CMI). Because CMI is a Zacks #2 Rank stock, Engines-Internal Combustion has a Zacks Industry Rank of 2.0. A little further down the list is Oil-International Integrated, which contains 19 stocks. Although this latter group does have five Zacks #1 Rank stocks, including PetroChina (PTR) and Statoil ASA (STO), its Zacks Industry Rank is 2.32 because 12 stocks have a Zacks Rank of #3.

The remaining six columns are basically the same as the older version of the list. We’ve added the number of companies within an industry next to each group’s name. The Zacks Industry Rank, % of Positive Revisions (formerly labeled “Net % of FY06 Revised Up”), Positive Revisions (formerly labeled “Estimates Revised Up”) and Negative Revisions (formerly labeled “Estimates Revised Down”) have been carried over.

The new list can also be sorted by any of the column headings. For instance, if you want to sort by % of Positive Revisions, just click on the column heading and you will the see the results displayed accordingly. Click on the same column header a second time, and you can change the order of sorting from ascending to descending. (A small red triangle shows the order in which the column is sorted; an upward triangle means ascending and downward triangle means descending.)

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.

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MORE FROM ZACKS EQUITY RESEARCH…

Rating Upgrades - NEW! 

Find out which stocks have been recently upgraded by Zacks Equity Research: click here.

 
Zacks Equity Research Buys - NEW! 

Read the reports on all of the stocks on the Zacks Equity Research Buy List: click here.

 
Analyst Blog

Get real-time market insights from Zacks Equity Research Analysts. To see their latest posts, click here.

 
BULL OF THE DAY

Aracruz Celulose S.A. (ARA) - Promising Outlook. For full Zacks research report, click here.

 
BEAR OF THE DAY

MannKind Corp. (MNKD) - Cash-Burn Rate Continues For full Zacks research report, click here.

 
ZACKS ANALYST INTERVIEW

Europe Sees Market Gains Despite Pains

Why the rally in equities then? It is simply a fundamental story: equities are cheap. More...

 
ZACKS EARNINGS TRENDS

Sector Selection Key to Second Quarter Earnings

While stocks in the Small Cap 600 have slightly higher expected growth than S&P 500 stocks, the real difference is between the economic sectors, regardless of a company's size. More...

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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.

 
Here are four stocks that make the grade for the Return on Equity Profit Track:

Lamson & Sessions Co. (LMS), which has a ROE of 43.85 and a price to sales ratio of 0.80, recently raised its earnings forecast for the second quarter and the full year. Lamson & Sessions Co. now expects second-quarter earnings per share to be between 80 cents and 83 cents. The company’s 2006 guidance is between $2.25 to $2.30 per share. Analysts are in agreement with these expectations. Wall Street estimates for the second quarter are currently 80 cents per share, which is an increase of 19 cents over the past 30 trading days. Full-year 2006 earnings estimates are currently pegged at $2.25 per share, an increase of 35 cents from one-month ago levels. Second-quarter results will be announced on July 27, 2006. Continue your research on LMS at: http://at.zacks.com/?id=2389.

Quanex Corp. (NX) satisfies the criteria for this Profit Tracks with a ROE of 25.12 and a price to sales ratio of 0.82. In early June, the company posted fiscal second-quarter earnings of $1.07 per share, beating the consensus estimate by a penny. Quanex Corp. noted that overall demand in the second half of 2006 is expected to be up appreciably compared to the second half of 2005, supported by a healthy economy, historically low interest rates and new programs at both operating segments. The company’s fiscal 2006 guidance of $4.00 to $4.20 per share inline with current analyst estimates of $4.20 per share. One month ago, analysts were forecasting $4.15. Continue your research on NX at: http://at.zacks.com/?id=2390.

Trinity Industries, Inc. (TRN) recently boosted its earnings guidance for the second quarter from a range of 52 cents to 57 cents per share to the current forecast of 60 cents to 65 cents. Analysts are in agreement as evidenced by current estimates of 63 cents per share. The company commented that all of its business segments continue to perform well, which will result in a stronger second quarter than it anticipated. TRN offers a ROE of 10.43. Continue your research on TRN at: http://at.zacks.com/?id=2391.

Worthington Industries, Inc. (WOR) has a ROE of 15.10 and a price to sales ratio of 0.64. The company recently released its fiscal fourth-quarter report. The results showed a year-over-year improvement in earnings per share and net sales. Earnings per share were ahead of the consensus estimate by about 39%. The company said that every business segment performed well, with its Pressure Cylinders segment leading the way by producing a record performance in both sales and earnings. Continue your research on WOR 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

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SCREEN OF THE WEEK

Finding Growth Stocks at Excellent Values

Kevin Matras shows you how to find great growth stocks at an excellent value: http://at.zacks.com/?id=2395.
 

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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 – Guess? Inc. (GES)

Guess? Inc. (GES) reported that June same-store sales grew 11.7%. Analysts, on average, predicted an increase of 8.8%. Total sales grew 16.9%, to $62.9 million, from $53.8 million during June last year. For the second quarter ended Jul 1, same-store sales rose 17.4%. Total sales climbed 23.3% to $163.9 million, from $132.9 million last year. Estimates are still rising significantly and we believe the stock should still be held. Read the full analysis on GES at: http://at.zacks.com/?id=2494.

 
Growth & Income – Claire's Stores, Inc. (CLE)

Claire's Stores, Inc. (CLE) recently announced that for the five weeks ended July 1, 2006 comparable store sales increased 2% after increasing 4% during the corresponding five-week period last year. Total sales increased 7% year-over-year. Read the full analysis on CLE at: http://at.zacks.com/?id=2495.

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Zacks Rank continued...

Momentum – Cameco(CCJ)

It has been awhile since we last visited Cameco(CCJ), which was a Momentum Stock of the Day on Jan 3, 2006. Since then, CCJ has gained about 19%. The stock topped out on May 11 at $45.34. After making that 52-week high, CCJ has sold off, bottoming out on Jun 13 at $34.01. Interestingly, while CCJ was caught up in the general market selloff of late May of this year, it never crossed below its 200-day moving average. Nor did the 200-day moving average ever turn down. A 19% winner in about a half year is nothing to sneeze at, and given the positive technical picture, CCJ still looks like a winner for the rest of the year. Read the full analysis on CCJ at: http://at.zacks.com/?id=2496.

 
Value – WPS Resources Corp. (WPS)

WPS Resources Corp. (WPS) agreed to buy Peoples Energy Corp. for about $1.52 billion in a move to expand further into gas distribution. Under the terms of the deal, each share of Peoples Energy be converted into 0.825 share of WPS Resources common stock. WPS Resources shareholders would own about 57.6 percent of the combined company. Read the full analysis on WPS at: http://at.zacks.com/?id=2497.

 
Zacks Rank Resources

• View All Zacks #1 Rank stocks: Go to: http://at.zacks.com/?id=2383.
   
• Free Zacks Rank Guide: Learn how to use the Zacks Rank to pick more profitable stocks. Get the guide: http://at.zacks.com/?id=2558.
   
• Zacks Advisor: Discover Ben Zacks' hand picked #1 Rank stocks on his Timely Buys list at: http://at.zacks.com/?id=2559.
   
• Zacks Options Trader: Combine the timeliness of Zacks #1 Rank stocks with the explosive profit potential of options. Learn more at: http://at.zacks.com/?id=2707.
   
• Zacks Wealth Management: Own all the Zacks #1 Ranked stocks in a portfolio managed by Zacks. Learn more at: http://at.zacks.com/?id=2560.

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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.

 
Here is this week’s article on how Schaeffer’s Tools can help you Profit with Options.

As we've been saying the past few weeks, the market looks like it wants to try and form a tradable bottom. For that reason, we’ve been focusing on using our bullish filters to find long plays. In fact, two weeks ago we said “The past few weeks have provided some very interesting days. We went practically straight down for five weeks starting in mid-May, but the past week or so we've seen some signs of a bottom trying to form. It all started Thursday, June 15 when we had a huge rally of nearly 200 points on the Dow; this past Wednesday there was another 100-point gain on the Dow.” Now throw in Thursday’s (June 29) 217-point explosion and the path of least resistance is definitely higher.

Now looking at the past three weeks, the filters have been hot. Over this time we’ve gone three for three with one huge winner. We recently recommended going long Quest Diagnostics (DGX) and since then, it’s gained over 3.5% and still looks technically very strong. A week earlier, we said to turn bearish on Cisco Systems (CSCO). Now note that since then the overall market has gone higher, yet our bearish call on CSCO has been right, as it’s down 1.15% over this time. Now let’s be honest those gains aren’t anything to get overly excited about – but they do show our directionally-based picks are off to a great start. That brings us to General Motors (GM).

Approximately a month ago, we said to go long GM and since then the stock has gained a massive 14% – not too bad at all for a three week trade.

Sparking the rally in GM was a letter from billionaire investor Kirk Kerkorian to GM’s CEO urging the company to join the partnership between France’s Renault and Japan’s Nissan. This sent the shares higher by 10%, pretty good for a stock that most of the Street hates.

This is the beauty of using options - you only have to be right a few times out of every ten trades. With the leverage that short-term options provide, you could take several losers in a row, but that one big winner (like a GM) can more than make up for the losers. Now it’s important to always remember to cut losses. Don’t just buy an option and hold it forever. If the stock completely breaks down, get out and save some capital. There are so many great looking plays out there that you want to make sure you have the majority of your cash in the absolute best looking ones.

So what exactly lead us to pick GM long? It was the High Open Interest Put filter. This is a great filter to find bullish plays. We liked GM because it had a huge build-up of puts down at the 25 level. As we said back then, ‘from our contrarian point of view, a large number of puts accumulated at a certain strike just below the stock's current level is a sign of potential options-related support. 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: a large number of puts at a certain strike has the potential to serve as a solid level of support.’

Without getting into it again, just about every sentiment indicator that we use was bearish on GM. The short-term option players were bearish, shorts were all over it, and the analysts hated it. Add it up… to see the stock outperforming and near strong support, we viewed this skepticism as a sign that there’s still a good amount of cash still left on the sidelines. So this one looked like a great play and fortunately; it is working great.

Please continue to use all of the filters on Zacks.com/Options for more money-making ideas. Also, be sure to visit SchaeffersResearch.com for even more option takes. Remember; practice makes perfect, so make a few paper trades and discover what strategy works best for you. Like we always say, these are options, and it only takes 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.

Discover all the tools and commentary available from the Zacks.com Options Center at: http://at.zacks.com/?id=2382.

 
Zacks Rank + Options = Trading Success!

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.

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Here we cast the spotlight on a timely Featured Expert commentaries that recently appeared on Zacks.com.

 
Technical Roadblocks

Dr. Melvin Pasternak doesn’t see swift recovery from the S&P’s mid-June bottom and expects choppy trading. http://at.zacks.com/?id=2428.

 
Bancolombia Whiplash

 
Investor Be Nimble

Dennis Slothower plans to stay defensive as long as crude oil prices continue to rise. Read his commentary and stock profiles. http://at.zacks.com/?id=2366.

OTHER TOOLS FROM ZACKS

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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:

• +33% average annual return since 1988 versus +11.9% for S&P 500
• Outperformed S&P 500 in 17 of the last 18 years
• +43.8% total return from 2000 to 2002 — the worst bear market in over 60 years.
• +18% in 2005

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?

• Broker Recommendation changes
• Earning Estimate revisions
• Earnings Announcements
• Zacks Rank changes

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

Senior Market Analyst
Zacks.com

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.

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