Tuesday - October 24, 2006
 Want to view the archive of past issues? Click here. Manage Profit from the Pros subscription: 1. ZACKS RANK BUY STOCKS Zacks #1 Ranked stocks average a 32.4% annual return. Every day on Zacks.com we highlight four new 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 - Schlumberger (SLB) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum - Universal Compression Holdings (UCO) Universal Compression Holdings (UCO) is only 10 trading days away from its September 2006 quarter earnings report. UCO expects to announce earnings on Nov 6. Consensus estimates from analysts are for the company to report EPS of 75 cents, compared to 54 cents in the same quarter in 2005. Since being a Zacks Momentum stock of the day on Dec 23, 2005 UCO is up nearly 38%. Looking at the current chart, the stock found very strong support at the $50 level, and should be able to challenge the July high of $65.21. Read the full analysis on UCO now! Knight Capital Group Inc. (NITE) surprised to the upside by 30.0% when it reported third-quarter earnings per share of 26 cents. Total revenues increased 14.1% to $210 million. Since we first featured the company on Aug 29, it has increased 14%. NITE is a Zacks #1 Rank stock. Read the full analysis on NITE now! Find out what the best-performing stocks within the Zacks #1 Rank list each week. Last week’s top performers included CTI Industries Corporation (CTIB) with a 24.2% gain.
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: Discounted Fundamental Strength This Profit Track identifies stocks with strong underlying fundamentals and low valuations. These are companies with solid balance sheets and a history of profitability that are reasonably priced. Although conservative in approach, this strategy has generated double-digit returns for five consecutive years, including a 23.5% gain in 2005. Arrow Electronics, Inc. (ARW) will report financial results for the third quarter on October 25, 2006. In late July, the company posted second-quarter earnings of 77 cents per share, excluding items. The result topped the consensus estimate by about 5% and surpassed last year's 54 cents. Arrow Electronics said its ongoing initiatives, coupled with favorable conditions in the marketplace, led to record second quarter sales and earnings in excess of the company's expectations. ARW offers a PEG ratio of 0.76 and a price/sales multiple of 0.29. Read the full analysis on ARW now! Cummins Inc. (CMI) has a current ratio of 1.69 and a debt/equity level of 0.30. The company sports a PEG ratio of 0.66 and a price/sales multiple of 0.65. Cummins, a Zacks #1 Rank (Strong Buy) company, will release its financial report for the third quarter on October 31, 2006. In the second quarter, earnings per share were ahead of the consensus estimate by almost 6%. Cummins has topped analysts’ expectations four times out of the past five quarters. Read the full analysis on CMI now! Drew Industries, Inc. (DW) will announce third-quarter results on October 31, 2006. In early August, the company released second-quarter earnings of 47 cents per share, surpassing the previous year's result. Drew Industries noted that it continued to achieve market share gains in many of its established product lines during the quarter, as well as in several of its new product categories, particularly RV axles. DW has a PEG ratio of 0.88 and a price/sales multiple of 0.78. Read the full analysis on DW now! Quanex Corp. (NX) satisfies the criteria of this Profit Track with a PEG ratio of 0.54 and a price/sales multiple of 0.63. In late August, the company announced fiscal third-quarter earnings per share from continuing operations of $1.14, matching both the year-ago total and the consensus estimate. During the previous four consecutive quarters that led up to the third quarter, NX exceeded Wall Street expectations each time. Read the full analysis on NX now! To see the full list of stocks that currently pass this winning screen, click here. 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”. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Kevin Matras explains why stocks with new analyst coverage are stocks you want to own. More... 3. ZACKS EQUITY RESEARCH We recently spoke at length with senior analyst Paul Cohen, who covers small-cap stocks in the ethanol industry. With oil prices softening over the past several weeks, are these companies still looking attractive? And would now be a good time to buy in, or does he expect a pullback even further for this group? What are your current recommendations on the ethanol companies in your coverage? For the ethanol companies I cover at this time for Zacks Research – Pacific Ethanol (PEIX), VeraSun (VSE) and Aventine (AVR) – on all three of them, I have a long-term Buy. However, all ethanol stocks look to stay relatively weak as long as gasoline prices remain lower and supplies of oil are plentiful. If we were playing the stock market with these companies, we’d likely consider them Holds or even Sells right now. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - What would be some of the major factors that you see helping these ethanol stocks? The biggest potential factor would involve a major event in the Middle East, such as a decision, say, by the U.S. or Israel – or both – to strike at Iran’s nuclear capabilities. Such an event would clog up the Strait of Hormuz where a considerable amount of oil is shipped through, and send oil prices soaring. We would definitely see prices per barrel go up to $75 or even as high as $100 or more in a case such as this. As a result, ethanol would play a much more increased role in gasoline supply, and its price would ratchet up along with the price of oil. Barring such an extravagant occurrence, however, do you see a strong future for ethanol companies? The overall impetus for ethanol is strong and will continue to be strong. Ultimately, the ethanol business will convert to cellulose – the technology is not quite there at this time, but in three-to-four years it will be – and this will bring down the cost of manufacturing and producing ethanol. The other driver in the industry is the firing of ethanol plants with coal rather than natural gas. This will make the companies more profitable, and the financing of the industry will go to the low-cost producer. Not now, however; I’m thinking this will be over the next two or three years. I do expect these smaller ethanol companies will be the energy industry large-caps of the next generation. This fuel is the real deal. We anticipate these companies to grow to $1-2 billion in market cap, and estimate we may see $6-7 billion by 2015 or so. We’ve never seen the potential for growth in this industry like this before. Also, the big companies will no doubt buy out the little guys. Right now there are 14 publicly traded ethanol companies and 31 private companies. I expect we’ll see the privates getting bought up. The game is financing. And who is Wellington going to write the check for? The lowest-cost producer. As businesses, are they being run efficiently at this point? I think VeraSun is one of the best-run ethanol companies in the U.S. It is also the second-largest, I believe. They have really copied the Archer-Daniels Midland (ADM) model for running an ethanol business. Pacific just bought a 42% stake in a private ethanol company. Their plants are smaller than those anticipated at VeraSun and Aventine, but Pacific is commanding market share in California. Long-term, I see Pacific being attractive, and I look for them to expand their business outside of California. Overall, we would accumulate positions in ethanol stocks at these levels. We’re not sure where the bottom is, but the upside on a long-term basis is considerable. The road may not be smooth for growth in this industry in the near term, but ultimately we see the need for ethanol to be overwhelming. The industry also has important political backing on both sides of the aisle. Paul Cohen is a senior analyst covering stocks in the ethanol industry for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include SanDisk (SNDK), Schering-Plough (SGP), Satyam (SAY) and Campbell Soup Company (CPB). See their latest posts: click here. Schering-Plough - Turnaround is Complete. For full Zacks research report, click here. Infineon Tech - Some Market Weakness. For full Zacks research report, click here. The Week of Oct 23 – Oct 27 Yet Another Quarter of Double-Digit Earnings Growth 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.
4. 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. Zacks/Schaeffer’s Options Trading service. This week we'll take a look at the Schaeffer’s Equity Scorecard and use it to find a bearish play. What exactly is the Schaeffer’s Equity Scorecard? It’s a combination of sentiment and technicals with the scores ranging from 10 to zero. On this scale, 10 is the best rating and thus the "most bullish" and a 0 is the worst rating and thus the "most bearish". The Equity Scorecard can be found on SchaeffersResearch.com and can become a pivotal trading tool for your research and analysis. Now for a little bit about our methodology. We call it Expectational Analysis®, meaning that we seek 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. Now, 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. Turning back to the Scorecard, its now easier than ever to find the top and bottom rated stocks based on the Schaeffer's Equity Scorecard as our premium tools are now available to everyone. Furthermore, our S+ commentary is also available to anyone. Here you'll find our best content and some great trading ideas as well. One of the aforementioned premium tools involving the Scorecard is the High/Low Equity Scorecard. This filter will allow you to quickly and easily find all the stocks in our database with a Scorecard rating of 8.0 or greater, or 3.0 or less. In other words, all of the best bullish and bearish looking trades according to our methodology. Looking at the list of scores 3.0 or lower late last week, one intriguing name was coal giant Arch Coal (ACI), which checked in with a Gold Score of 3.0. Technically, ACI has been in a solid downtrend since May and its lost over 24% year-to-date – not a good picture. The real question now is do we see optimistic sentiment? Remember, we want to see optimism towards a weak performer as a sign that there’s still room to drop before a tradable bottom can form. Now let's look at some sentiment indicators to see what the crowd is thinking. Remember, we want to see optimism as a sign a bottom hasn’t formed yet. One such indictor that we like to utilize for this is the Schaeffer's put/call open interest ratio (SOIR). This ratio shows how many bearish puts there are compared with the number of bullish calls among near-term options. As it turns out, ACI's SOIR is 0.62 and ranks lower than 86% of those taken during the past year. This suggests that option players continue to try to pick a bottom, which is exactly what we want to see. Short selling is one stock-trading strategy that basically involves selling a stock with the intention of buying it back later at a lower cost. In other words, you are betting that the shares will go down. For a bearish play, we want to see a lack of shorts reducing the odds of a short covering rally on any good news. Looking at ACI, it would take over three days for all of the shorts to buy back their bearish bets. This is a pretty neutral number, but by no means does it suggest a large buildup of bearish shorts. The final indicator that we like to use is the attention being paid to a security on Wall Street. If the Street continues to love a stock that is in a steep downtrend, that only increases the odds of some downgrades down the road. Turning to ACI, this isn’t a single "sell" rating out of 12 total recommendations – thus leaving the door wide open for some downgrades. With all of that said, we like ACI short and would recommend playing an intermediate-term put on it. Write this one down and let's see how it does. But to me, this one looks like a nice play. Please continue to use all of the filters on these pages at Zacks.com provided by Schaeffers Investment Research 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, don't get discouraged. The beauty of options is the leverage they provide. It takes only a few winners out of every 10 trades to make you a very happy investor. Be sure to visit SchaeffersResearch.com for more market commentaries and Good luck! Discover all the tools and commentary available from the Zacks.com Options Center. Leverage the timeliness of Zacks #1 Rank stocks with options trades that maximize profits and minimize risks. Learn more about our new Options Trading service. 5. FEATURED EXPERTS Here we cast the spotlight on a timely Featured Expert commentaries that recently appeared on Zacks.com. Kelley Wright explains that conventional wisdom as currency is worth nothing. Discover what that means and check a few stocks. More... If a pullback occurs, Gregory Spear says it would be a very buyable dip. Check out his latest commentary. 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. Or view the full list of Zacks #1 Rank FREE PORTFOLIO TRACKER Do you believe that these events affect stock prices?
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Zacks #1 Stocks on the Move 05/21/2013
| Company Name | Symbol | %Change |
|---|---|---|
| FEDERAL MOGU | FDML | 6.46% |
| RADIANT LOGI | RLGT | 4.26% |
| NEW ORIENTAL | EDU | 3.99% |
| NATUS MEDICA | BABY | 3.30% |
| SUMMER INFAN | SUMR | 2.71% |
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