Thursday - July 20, 2006
 Want to view the archive of past issues? Go to: http://at.zacks.com/?id=2337. Manage Profit from the Pros subscription: 1. ZACKS EQUITY RESEARCH Private equity firms seem to be picking up the pace in acquiring publicly traded specialty retail companies. Therefore, we sat down with senior retail analyst Rob Plaza, CFA to find out if this trend is expected to continue, and how investors might best be able to play this development. We’ve seen several private equity buyouts of public specialty retail companies recently. Can you tell us a little about this? Sure. Lots of the companies in my coverage over the past couple years – J. Jill, Toys R Us, Albertson’s, Neiman Marcus, Mossimo, and now PETCO (PETC) – have been taken private by equity firms. The two most recent have been for PETCO and Michael’s Stores (MIK). There have even been a couple other big ones this year: The Sports Authority and Burlington Coat Factory. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The general thinking behind this is that when stock price gets too cheap relative to the underlying value or cash flow being generated by a particular business, that’s a good time for that company to be taken private. Publicly traded retailers often take it on the chin when they make business moves that make sense over the long term but don’t really work in the short term. Say you’re running a billion-dollar retail business, and you’re trying to work in the right inventory, cleaning out what’s on deck, closing some stores in some unprofitable areas and opening up some new stores. Well, you’re likely to see your profits go down, your same-store sales go down, and as a result your stock’s going to get hammered. Whereas a private equity firm can do what it wants without the market looking over its shoulder, and the focus can go to increasing the value of the company over the long term. Then, in 2-3 years when the market is a little more favorable to retailers, they can bring your company public again, and turn a nice profit by doing this. In the case of PETCO, for instance, I like the business from a long-term perspective. But they were really going to struggle if they weren’t bought out, and it was tough for the stock to do anything. The companies you are mentioning here are all in specialty retail. Do these private buyouts have anything to do with these companies struggling for market share against the mass market retailers? Actually, these specialty companies have done a pretty good job of competing against the types of stores like Wal-Mart (WMT) and Target (TGT). Those bigger companies tend to cater to price-conscious customers. So let’s say you’re looking to buy a baseball mitt – if you’re not all that concerned about what type of mitt you get, you can probably find one for cheap at Wal-Mart. But if your kid plays on the high school baseball team or you’re in a weekend softball league, you’d be better off going to Sports Authority and getting a good quality mitt. Besides, people working at a specialty store are going to know more about the products they have in stock. At Wal-Mart, they’re just going to tell you, “The baseball mitts are over there.” To read the complete Analysts Interview, click http://at.zacks.com/?id=2693. Rob Plaza, CFA is a senior analyst covering the retail and specialty retail sectors for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Analyst Blog Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Johnson & Johnson (JNJ), Westamerica Bancorp (WABC), MGIC Investment Corp. (MTG) and Sanmina-SCI Corp. (SANM). To see their latest posts, click here. Find out which stocks have been recently upgraded by Zacks Equity Research: click here. Read the reports on all of the stocks on the Zacks Equity Research Buy List: click here. Vodafone Group (VOD) - Building Momentum. For full Zacks research report, click here. Digitas, Inc. (DTAS) - Lowering Guidance. For full Zacks research report, click here. Earnings Expectations Still Solid The Week of Jul 17
2. ZACKS CHALLENGE: TOP PLAYER INTERVIEW Zacks.com features a free investment simulator where our customers can prove their stock picking skills to the rest of the world. In these articles we will share with you the insights and recommendations from Top Simulator Players. Learn more about the current Zacks Challenge at: http://at.zacks.com/?id=2514. bpub With the Third Quarter Zacks Stock Challenge underway, we sat down with Chris Berry (aka: bpub) to uncover the secret of his success. Chris’ Simulator portfolio is off to a solid start in the new quarterly competition, garnering a top ten ranking with a current overall return of approximately 13%. This market enthusiast describes himself as a newbie, who hasn’t yet established an investment strategy or style. However, one quarter of playing the Simulator may change all that. The market novice stated, “I don't really have a style just yet. I'm actually new to the stock markets, and I'm using the simulator to develop my skills. Mostly I guess I try to trade on momentum.” His bias towards momentum can partially be attributed to watching how the other Stock Challenge participants are trading. Chris analyzes the strategies that other players are using and tries to mimic those traits that are most successful. He is also a big believer in thorough research and makes regular use of sources such as Zacks.com, Zacks Profit From the Pros, Scottrade, Stockcharts.com, Reuters.com, MSN money and Google. Based on his research, analysis of other players, and some market savvy, this stock trader had success with positions in Volcom (VLCM), Allscripts Inc. (MDRX) and TD Ameritrade Holding Corporation (AMTD) just to name a few. His current portfolio holdings include EMC Corporation (EMC) and Lucent (LU). Click here to check out this player’s current portfolio: http://at.zacks.com/?id=2515. The details behind this player’s strategy are? Chris explained that the Simulator is his testing ground so that he could perfect his momentum trading skills. So we decided to dig a little deeper and asked this astute investor how has he been applying his momentum strategy. “I watch all the news I can get my hands on. I also use streaming data from Scottrade to look for shakers and movers. When I spot a stock on an upward trend, I quickly research it. I look for one in the $3 to $15 dollar range, with at least 500,000 shares in volume. I'm also learning more and more to trade against the market. The chicken littles out there are ruining the market these days with their panic selling over news that has nothing to do with the stocks they're holding. I like to capitalize on that and buy the cheap stuff after they've dumped it off. I also like to short stocks that I know are going to sell off on the recent news headlines,” answered Chris. What does he look for in a stock? The Stock Challenge contender commented, “If I'm looking for something to hold for the long run, then naturally I look for strong fundamentals, and steady performance. Being in the medical profession, I also tend to look at a lot of the bio companies. I look for companies developing novel products and ideas that once completed will change everything. I'm currently holding one now in my personal portfolio Molecular Diagnostics (MCDG) that's sitting at 18 cents. I know and understand the product they have developed, and can't wait for it to take off.” When is it time to sell? Chris explained that he will pull the trigger if a loss grows to more than 20%. The disciplined investor said, ”I like to stay faithful to stocks that I'm not day-trading, but I can only sit and watch my money dwindle away for so long.” What does the future hold? This Simulator participant is optimistic about the market but urges investors to remember that the events in the Middle East have nothing to do with the rest of the world's need for soap, coal, medicine and the like. In addition to being an optimist, Chris is also a realist. He remarked that as far as predicting the Dow’s future, his magic eight ball says "ask me later." Any advice? Chris’ advice echoed what countless other Simulator competitors have suggested. He said, “Research, research, research. Study everything you can get your hands on. Most importantly, don't come to the table with more than your willing to lose." It’s free. Its fun. It's the place to show your investing prowess. The best stock pickers will be rewarded with thousands of dollars in prizes. Learn more at: http://at.zacks.com/?id=2671. Trade Options? Then sign up for the Zacks Options Challenge at: http://at.zacks.com/?id=2672. 3. 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 Track: 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. Atwood Oceanics, Inc. (ATW) released financial results for the fiscal second quarter in late April. Earnings per share were 50 cents compared to last year’s 15 cents. Revenues increased nearly 65% year-over-year. Financial results for the third quarter will be available on July 28, 2006. Atwood Oceanics meets the requirements for this Profit Tracks with a PEG ratio of 0.39. Continue your research on ATW at: http://at.zacks.com/?id=2354. Grant Prideco, Inc. (GRP) has a PEG ratio of 0.42. The company’s financial results for the second quarter will be released on Monday, July 24, 2006. In mid-April, the company issued its first-quarter report, stating that each of its three primary operating segments reported operating income margins in excess of 30%, and its total backlog increased to over $1 billion, a 24% sequential increase, which provides strong forward visibility. Quarterly earnings per share improved year-over-year and beat the consensus estimate. Continue your research on GRP at: http://at.zacks.com/?id=2355. More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Grey Wolf, Inc. (GW) offers a PEG ratio of 0.32. The company posted first-quarter results in early May. Earnings per share topped analysts’ expectations by about 11% and surpassed the year-ago result. GW stated that on the heels of the best year in the its history, it produced record quarterly results for revenue, net income, and EBITDA, spurred by both daywork and turnkey operations. Grey Wolf will announce financial results for the second quarter on August 1, 2006. Continue your research on GW at: http://at.zacks.com/?id=2356. The Manitowoc Company, Inc. (MTW), a Zacks #1 Rank (Strong Buy) company, will report second-quarter results on July 26, 2006. In late June, The Manitowoc Company issued an increased earnings guidance for the full year. MTW now expects 2006 earnings per share to between $2.50 and $2.60 versus its previous forecast of $2.15 to $2.25. The guidance is inline with current Wall Street expectations. Value investors may find this company’s PEG ratio of 0.29 to be quite appealing. Continue your research on MTW at: http://at.zacks.com/?id=2357. To see the full list of stocks that currently pass this winning screen, go to: http://at.zacks.com/?id=2358. 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=2359. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Kevin Matras goes over his ‘Big Money’ screening strategy, which has trounced the market year after year: http://at.zacks.com/?id=2360. 4. ZacksAdvisor.com TIMELY BUY of the WEEK Here you'll discover a Zacks #1 Rank stock hand selected by Ben Zacks to outperform the market over the next 30 to 90 days. This week's Timely Buy is...
AmBev (ABV), is the largest beverage company in South America, producing beer, soft drinks, sports drinks, iced tea, and bottled water. The 2000 merger of Brazil’s top two beverage firms, Companhia Cervejaria Brahma and Companhia Antarctica Paulista, formed AmBev. The company is headquartered and operates primarily in Brazil. AmBev has operations in Argentina, Chile, Venezuela, Uruguay, Bolivia, and Paraguay; it began expanding into Central America and Peru in 2003. The company is also the exclusive distributor of Pepsi beverage products in Brazil, though beer remains its core business. The company has 41 beverage production plants (soft drinks, beer, water, ice tea, and isotonic drinks), four malting plants, one soft drink concentrate plant, one guarana farm, and three barley fermentation units, for a total of 49 plants in Brazil and abroad. While the beer segment generates approximately 80% of revenue, soft drinks and other products (non-alcoholic and non-carbonated) account for the remaining 20% of revenue. AmBev has been posting good results since 2004, due to the continued economic recovery in Latin America, particularly in Brazil and Argentina. Its results were also aided by the Brazilian beer market, due to successful sales initiatives, such as price readjustments, increasing direct sales distribution participation, and a focus on premium/higher margin brands. The company will continue to benefit from economic growth in Latin America, particularly Brazil, where the Brazilian Central Bank started to cut interest rates in September 2005, after a long period of tight monetary policy. Nowadays nominal interest rates in Brazil are 15.5% per year, and real interest rates remain one of the highest in the world, around 11% per year. There is a long way down for Brazilian domestic interest rates. Earnings estimates have been moving up strongly for this year and next. Over the past 90 days, this year's estimates have increased 23.8% to $2.08 per share, while next year's estimates have jumped 14.9% to $2.31 per share. Three analysts have raised their numbers for both this year and next. The stock is currently trading at 17.3x next year's estimates, above the long-term growth rate of 12.9%, giving the stock a PEG ratio of 1.34. ABV pays a 1.5% dividend yield, well above the industry's average of 0.3%.
5. FEATURED EXPERTS Here we cast the spotlight on a timely Featured Expert commentaries that recently appeared on Zacks.com. Jim Collins believes that fundamentals suggest stocks will eventually come back strong. Read his analysis and stock profiles. http://at.zacks.com/?id=2399 Jack Adamo says his energy holdings may buck the market’s shaky trend. Read his commentary and stock updates. http://at.zacks.com/?id=2429 Richard Moroney says investors should consider playing some defense. Discover what he recommends. http://at.zacks.com/?id=2406 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 Rank (Strong Buy) List has produced the following results for investors:
And just as importantly, our #5 Ranked stocks (Strong Sells) have alerted investors as to which stocks to dump from their portfolios to avoid unnecessary losses.
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Zacks #1 Stocks on the Move 05/23/2013
| Company Name | Symbol | %Change |
|---|---|---|
| WESTELL TECH | WSTL | 6.92% |
| ALLIANCE FIB | AFOP | 4.78% |
| STEIN MART I | SMRT | 3.50% |
| MAXWELL TECH | MXWL | 3.03% |
| SYNAPTICS IN | SYNA | 2.62% |
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