Wednesday - February 7, 2007
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1. ZACKS RANK BUY STOCKS
Zacks #1 Ranked stocks average a 31.8% 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 – WebEx Communications, Inc. (WEBX)
Earnings estimates for WebEx Communications, Inc. (WEBX) have been trending higher over the past week. This year's numbers have jumped 10 cents to $1.32 per share. Next year's estimates have risen 12 cents to $1.63 per share. WEBX has exceeded earnings forecasts in four out of the past five quarters, with two of those periods registering double-digit surprises. Read the analysis of WEBX now!
Growth & Income – Franklin Resources, Inc. (BEN)
Franklin Resources, Inc. (BEN), which was first highlighted as a Growth and Income pick on Nov 14, is still a Zacks #1 Rank stock. Moreover, the stock is up over 12% since its debut. The company beat the Street’s earnings estimate for the past nine quarters by an average margin of 10.2%. Analysts continue to raise their profit forecasts. BEN has instituted an annual dividend increase every year since 1981. The company is currently yielding 0.50%. Read the full analysis on BEN now!
Momentum – CryoLife (CRY)
On Jan 25, CryoLife (CRY) will report fourth-quarter earnings on Feb 21. The consensus earnings estimate is for loss of one cent. This compares favorably with the loss of 10 cents reported in the prior-year period. It is important to note that going into this quarter CRY has delivered four straight quarters of positive EPS surprises. Read the analysis of CRY now!
Value – AGL Resources, Inc. (ATG)
AGL Resources, Inc. (ATG), a Zacks #1 Rank stock, exceeded analysts’ earnings expectations in 13 out of the past 16 quarters by an average margin of 16.2%. Analysts have been upping their earnings estimates for both this year and next. On Feb 1, the Board of Directors authorized an 11% boost in the company’s annual dividend to $1.64 per share. The company has a price-to-book ratio of 2.0. Read the full analysis on ATG now!
2. SCREEN OF THE WEEK
Zacks.com offers three unique weekly commentaries that all
further our mission to help you Profit from the Pros. Today is
the latest installment of Screen of the Week from Kevin Matras.
Each week, Kevin shares with you another winning screen he has
discovered using the Research Wizard software from Zacks
Investment Research. Click here to learn more about the Research Wizard.
Beyond Earnings: The Difference Between Good Stocks and Great Stocks
With more than 2,000 companies reporting earnings in the coming weeks, here are two screens to help you take advantage of this busy season.
In both good markets and bad, strong earnings are one of the most important factors that influence stock prices.
But instead of just looking at the most recent quarter’s earnings, try looking for a pattern of increasing earnings.
Sideways earnings ‘growth’ (even if it’s good) or decelerating earnings can potentially signal a period of consolidation (or slowdown), which in turn can flatten out prices or send them lower.
But steadily increasing earnings, in which each period improves upon the last, typically means the company is doing something right. This can often be the difference between good stocks and great stocks.
In this screen, I’m looking for each of last seven quarters of earnings to be greater than the previous quarter’s earnings. (And each one of these stocks reports within the next two weeks.)
The parameters are:
Quarterly EPS Q(0) > Quarterly EPS Q(-1)
This screen is a great stock picker because it demands a consistency of excellent performance from a company over an ‘extended’ period of time.
This strategy will typically find stocks with fantastic earnings consistency and a history of beating earnings expectations.
Here are three stocks from this list (2/5/07):
Most screeners won’t allow you to compare one period’s earnings to another period, let alone the last seven quarters or more. But the Research Wizard will.
Sign up now for your two-week free trial to the Research Wizard and take your stock screening to another level. And when you’re done, backtest it to see if it works! And don’t forget to check out the winning trading strategies that come loaded with the program. Know when to buy and when sell. It’s all there. Find out how to pick the right stocks right now by learning more about our free trial to the Research Wizard stock picking and backtesting program.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
3. ZACKS EQUITY RESEARCH
With so much new technology seeming to constantly emerge from the Medical Devices industry, it is often hard to make heads or tails out of what’s really going on. To help clear up our perspective, we turn to Tom Park, senior medical devices analyst for Zacks Equity Research.
For the companies in your coverage that have reported so far, were their Q4 numbers better or worse than expected?
So far, Q4 EPS results are coming out better than expected. We are seeing several reported companies that exceeded our EPS expectations. Biosite (Nasdaq: BSTE) reported Q4 EPS that beat our estimate by $0.02 on revenue that also exceeded or forecast. MWI (Nasdaq: MWIV) reported Q1 EPS that beat our estimate by $0.02 on revenue that was below our forecast. Intuitive Surgical (Nasdaq: ISRG) reported Q4 EPS that beat our estimate by $0.12 on revenue that also significantly exceeded our forecast.
More. . .
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Are you noticing any issues developing among companies who compete in the same markets? Do these issues paint a more positive or negative picture going forward?
The diagnostic testing market is highly labor intensive and time consuming. Many companies like Immucor (Nasdaq: BLUD) and Biosite seek to automate the process or reduce diagnostic testing time, which is expected to reduce testing costs, inpatient care costs, and improve test accuracy. Thus, technological advances in diagnostic testing from R&D investments can play a role in helping to reduce healthcare costs and improve the quality of care.
Immucor commands a leadership position in the blood testing market. Ortho-Clinical Diagnostics, a Johnson & Johnson (NYSE: JNJ) company, is a direct competitor with licenses to manufacture an extensive line of blood banking reagents in the United States. Since 1999, Immucor remains the North American market leader. Using a razor/razorblade model, the company is able to effectively use reagent price increases to grow. In this razor/razorblade model, the company’s instruments are designed to operate with its proprietary reagents.
Despite its price increases, Immucor’s prices compare favorably with its peers. Other companies are trying to penetrate the market. So far, the competition has offered instruments with limited test menus and incomplete reagent product lines.
Biosite, on the other hand, is competing in a congestive heart failure market that is saturated and thus is under intense competition. The company is relying on the growth of other products in other disease areas and the development of new ones.
Should investors consider investing in these companies at this time, or would it be better to wait?
We consider the medical device industry to be market neutral at this point. In a bull market, such as what we’ve currently been seeing, we believe there are better opportunities in other industries.
Tom Park is a senior analyst covering the medical devices and technology group for Zacks Equity Research.
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Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Cutera (CUTR), W.W. Grainger (GWW), Aegon N.V. (AEG) and Tessera (TSRA). To see their latest posts, click here.
4. ZACKS WEALTH MANAGEMENT
Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Today’s topic is:
For those of you looking to do your estate planning, it is a good idea to first start with the basics: The federal estate tax and what is actually taxed when you leave this world.
The federal estate tax is based on the total value of the estate minus certain deductions. You have what’s called an exemption amount of $2 million for 2006, which then goes up to $3.5 million in 2009. After that, there’s a one-year repeal in 2010 and then back down to $1 million in 2011. Therefore, if you die in 2006, whatever is in your estate above the $2 million mark will be taxed unless you pass everything on to your spouse. (However, this opens up another issue because each of you should take advantage of your exemptions. We’ll tackle this in another issue). The highest tax bracket for this year is 46% and this is one reason you’d want an estate plan done.
What’s considered part of your estate?
The gross estate is made up of all the property in which you enjoyed benefits and had an interest at death. This includes things like cars, houses, clothes, savings, retirement accounts, and investments. Other items included after death are medical insurance reimbursements and state income tax refunds. Court awards for pain and suffering are part of your gross estate even if paid to your spouse after you die. If rental income is paid from rental property to the estate, that is included.
Those things are obvious, but what about the not so obvious?
Gifts made within three years of death. Gift taxes paid on gifts made within three years of death are included in the gross estate. Gifts made within three years are excluded. Keep in mind the exceptions resulting in gifts becoming a part of the estate:
Proceeds from life insurance policies. Life insurance proceeds are includible in your estate if the proceeds are received by your executor or you owned the policy. Rights of ownership also include the right to change the beneficiary, assign or pledge the policy, cancel it, or borrow against the cash value. Also, if you transfer ownership of a policy and die within three years, proceeds will be included in your gross estate. What if the insurance policy is on another person’s life? If you own the policy on your spouse for example, the cash surrender value will be part of your estate. This is often overlooked so be aware.
Survivorship annuities. This annuity pays benefits to one person and provides payments to a second person upon the first person’s death. The value of the annuity for the second person will be included on the first person’s estate. If the second person contributed to the purchase of the policy, a proportional amount to the extent of the first person’s contribution will be included in the gross estate.
Property held jointly. Generally, your gross estate includes the entire value of property you held jointly with others (proof of their contribution is needed to exclude their portion from your state) unless it was held with your spouse. In that case, half is includible in your estate regardless of whether or not your spouse’s contribution can be proven when you obtained the property. Also if the property was received from a third party (inheritance or gift), the survivor’s portion will be excluded from your gross estate.
Powers of appointment. Be aware of properties that you may not necessarily own but you have certain powers over. Perhaps you have the right to designate to whom the property will pass, or who will enjoy the property. This is included in your estate at death regardless of whether or not you exercised this power.
Properties in revocable trusts are part of your gross estate. If you still retain the rights of the property to use for yourself, pay legal obligations, to change beneficiaries, to revoke a gift, or to take property back, it will be included in your gross estate.
Properties you may have transferred during your life but retained rights, powers, use or possession after the transfer. These are called gifts with strings, which are not really gifts for tax purposes since they are part of your estate. An example would be an investment account where you had the right to income or right to direct that income to anyone.
Knowing these basics could save you and your family from estate planning mistakes (and a lot of grief) by being aware of what is includable in your estate. Remember that the only way to remove assets from your gross estate is to give up all rights to these assets. These are the basics. Know them and your options and, of course, hire a great estate planning attorney.
Jonas Zamora is a Certified Financial Planner™ professional
This article is provided for informational purposes only and does not constitute legal or tax advice. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.
CFP Board, a nonprofit regulatory organization, fosters professional standards in personal financial planning so that the public values, has access to and benefits from competent and ethical financial planning. CFP Board owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame logo), which it awards to individuals who successfully complete initial and ongoing certification requirements. CFP Board currently authorizes more than 50,000 individuals to use these marks in the United States. For more about CFP Board, visit www.CFP.net.
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MITCH ZACKS ON THE MARKETS
The stock market should begin to benefit from flows of assets out of other investment classes. More...
5. FEATURED EXPERTS
Here we cast the spotlight on a timely Featured Expert commentaries that recently appeared on Zacks.com.
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 (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 Ranked stocks.
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Charles Rotblut, CFA
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The Zacks Performance Rank performance is the total return of equal weighted simulated portfolios consisting of those stocks with the indicated Zacks Rank net of fees. Results reflect the reinvestment of dividends and other earnings. Simulated results do not represent actual trading and may not reflect the impact that economic and market factors might have had on decision-making if an adviser were actually managing a client's money.
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