Tuesday - October 31, 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 - Digital River (DRIV) More...
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Momentum - Rogers Communications (RG) Rogers Communications (RG) is up over 19% since it was a featured Zacks Momentum stock of the day. With the stock closing at a historic high of $56.98 on Friday, what does the future hold for RG? The company is expected to announce September 2006 quarter earnings on Tuesday with an analyst consensus estimate of EPS at 27 cents, versus 14 cents in the September 2005 quarter. With RG already setting new highs, it will take yet another positive EPS surprise over analysts’ consensus to sustain the current rally. Read the full analysis on RG now! Snap-On Inc. (SNA) posted third-quarter earnings per share of 48 cents. With analysts calling for 42 cents, the company surprised to the upside by 14.3%. The result was a 17.1% year-over-year improvement. Revenues climbed 8.2% to $599.5 million from $554.1 million in the prior-year period. SNA is up nearly 15% since it was first featured as a Value stock on May 9. Read the full analysis on SNA 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: Growth and Income This Profit Track looks for stocks that are paying dividend yields of greater than 8% along with other attractive fundamental attributes. Although this screen is based on a long-term and lower risk approach to investing, it has consistently beaten the S&P 500. American Home Mortgage Investment Corp. (AHM) offers a current dividend yield of 12.07%. The company recently released its third-quarter report, which included an increased common stock dividend policy that is expected to commence beginning in January 2007. Earnings per share totaled $1.36, compared to the previous year’s $1.09. Third-quarter earnings also topped the consensus estimate of $1.35 per share. AHM reaffirmed its 2006 earnings guidance of $4.85 to $5.15 per share. Wall street is currently calling for $4.95 per share, which is a four-cent increased from one week ago. Read the full analysis on AHM now! Deerfield Triarc Capital Corp. (DFR) recently declared a third-quarter dividend of 40 cents per share. The company will announce results for the third quarter on November 14, 2006. In mid-August, DFR reported second-quarter earnings of 35 cents per share, versus the year-prior result of 25 cents. The company’s current dividend yield stands at 10.36%. Read the full analysis on DFR now! Nordic American Tanker Shipping Ltd. (NAT) meets the criteria of this Profit Track with a current dividend yield of 12.43%. The company will release financial results for the third quarter on November 3, 2006. The company recently announced that it expects the third-quarter dividend to be in the range of $1.28 to $1.31 per share and its earnings per share for the third quarter of 2006 will be in the range of 92 cents to 95 cents per share. The second-quarter dividend equaled $1.07 per share. In late July, NAT posted second-quarter earnings of 68 cents per share, which was roughly 19% ahead of the consensus estimate. Read the full analysis on NAT now! Ship Finance International Ltd. (SFL) released second-quarter earnings per share of 60 cents, which topped Wall Street estimates by about 15% and improved on the year-prior result. The third-quarter financial report will be available on November 30, 2006. SFL’s current dividend yield of 8.58% beats the dividend payout of the average stock listed on the S&P 500. Read the full analysis on SFL 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 shows how to find great growth stocks at an excellent value. More... 3. ZACKS EQUITY RESEARCH Every week we seem to notice another small-cap software company either being bought out by a large-cap player or taken over by a private equity firm. We spoke with senior software analyst Larry Orlowski, CFA for some background and point of view on this recent development. What are your thoughts on the current consolidation in small-cap software these days? There is mergers and acquisitions activity always in the software sector. Typically, these tend to support valuations. Lately, however, there has been an uptick in activity and interest that has affected my coverage universe. These have been coming from different sources – such as private equity firms – as well as large, established players. More. . .
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - For example, two private equity firms announced last week they agreed to acquire Open Solutions (OPEN), paying a 25% premium to the market value of the software company. The Carlyle Group and Providence Equity Partners will pay $38 a share for Open Solutions, which includes $342 million of company debt. OPEN provides enterprise-level software and services assisting financial institutions with data processing and information management. The company’s main offerings are complete banking and credit union operating systems. The thing is, I was going to re-introduce a Buy recommendation on this company before the takeover announcement. To me, they were a small-cap, high-quality player. Apparently, some private equity folks identified this and are now taking the company private. This looks to be a good deal; this is a very well-run company with a lot of growth potential. Was this announcement a little surprising to you? It did come out as something of a surprise. Not that it isn’t a quality company, and it did happen to be on my list of possible takeover candidates. However, what I think is surprising is the large amount of companies I’ve been considering putting Buy recommendations back on that are being taken over. The number of deals in the small-cap software space is the real surprise. Not long ago, IBM (IBM) announced it had completed its acquisition of MRO Software (MROI), a publicly-held company out of Bedford, MA. MRO’s software is used by many of the world’s top companies to manage how they buy, maintain and retire assets – production equipment, transportation, tech hardware and software – in a wide range of industries: utilities, manufacturing, energy, pharmaceuticals, and so on. And the company’s software has real vertical expertise, as well. I wanted to put a Buy back on them, too, but while I was in the process of doing the work on it, IBM stepped in and bought the company. Then there is a company in the information tech services industry called Kanbay International (KBAY) which was recently bought out by Cap Gemini, a large European IT services company, for $1.25 billion in cash. This amounts to $29 per share, or a 16% premium to the day-before’s closing price. This deal makes sense for Cap Gemini; it was looking to increase its presence in India, and taking over Kanbay – a U.S. company with its headquarters outside Chicago, though most of its workforce is in India – will increase Cap Gemini’s workforce in India to 11,000. This also helps out Cap Gemini in other verticals, like financial services. I think part of what’s going on here is these established players – a big European IT services company, and a huge company like IBM – are out there looking for growth. By buying out these small-cap software companies, they are able to cherry-pick this growth within the software market. Click here to read the complete Analyst Interview. Larry Orlowski, CFA is a senior analyst covering the software sector of the IT industry for Zacks Equity Research. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Sohu.com (SOHU), VeriSign (VRSN), Ingersoll Rand (IR) and Compuware (CPWR). See their latest posts: click here. URS Corporation - Seeing Reinvestments. For full Zacks research report, click here. Navarre Corp. - Low Margins, High Risk. For full Zacks research report, click here. The Week of Oct 30 – Nov 3 Positive Revisions Return 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 Unusually High Option Volume filter for puts and try to find a bullish play. Before moving any further, we would like 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 already has. 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. Looking at the list on Friday afternoon, one name that struck me as intriguing was steel giant US Steel (X), which had over 16,000 puts trade - amounting to over twice its average daily put volume. Steel is a sector that has taken a beating the past few months, but recently it's been showing some signs of life. In fact, just this week, numerous steel names have broken several-month downtrends and moved above their 50-day moving averages - both signs that the downtrend could be over. Looking at commodities in general, Bernie Schaeffer noted just the other day that the Commodities Research Bureau Index (CRB) - simply known as the CRB, is down, near the nice round number of $300, which also coincides with its 160-week moving average. In other words, an above average chance of at least a bounce. Turning to US Steel, it has a ton of puts down at the $55 level. We won't get to into it here, but we view all of these bearish puts as having the potential to serve as strong support. It has to do with how market markers are hedged. By charting US Steel you can see what it did the past few days, as it bounced big time from the $55 level and it moved above its downward sloping 50-day moving average for the first time in several months. Again, this is a sign of a potential change in the downtrend. So we know that the crowd has been trading a lot of bearish puts on US Steel recently and there is huge put support at the $55 strike. That coupled with some improving technicals on US Steel and other steel stocks - and we could have a nice trade on our hands. Now we want to look at the sentiment. Remember, we want to see skepticism as a sign that there's cash left on the sidelines to push it higher. First off, one indicator that we use to measure sentiment is the Schaeffer's put/call open interest ratio (SOIR). This ratio shows how many bearish puts there are compared to bullish calls for the front three months of options. Currently, US Steel's SOIR checks in at a solid 1.23 -a pretty big number. Looking at that number versus the past year's worth of readings and we see it is higher than 70% of the readings over the past year, suggesting short-term option players are solidly in the bear camp. 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 bullish play, we want to see a lot of shorts betting against the shares, increasing the odds of a short covering rally on any good news. Turning to US Steel, we see that nearly 8% of its float is sold short - showing more bearishness. Finally, turning to the analysts, they are also bearish towards US Steel. According to Zacks, there are five "buys", five "holds" and two "sells". Should the shares begin to outperform, there's plenty of room for upgrades from this group. Add it all up and we think US Steel could make a nice play over the coming months and would thus recommend playing an intermediate term call on it. Write it down and let's see how we do, but right now it 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 - because 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! To learn more about the Unusually High Option Volume filter, click here. 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. Donald Rowe says the next bull market should be ready to unfold by early November. Read his commentary and recommendations. More... Joseph Parnes provides a technical outlook on market trends. Benefit from his insight and receive some stock updates. 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 05/17/2013
| Company Name | Symbol | %Change |
|---|---|---|
| VIASAT INC | VSAT | 19.35% |
| OLD SECOND B | OSBC | 5.76% |
| GAMCO INVEST | GBL | 4.61% |
| CORNING INC | GLW | 4.47% |
| SYNCHRONOSS | SNCR | 4.23% |
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