Wednesday - April 4, 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 – Valmont Industries, Inc. (VMI)
Valmont Industries, Inc. (VMI) only has one analyst following the stock, but he raised his 2007 estimate from $2.78 to $2.96 per share on February 16. Similarly, next year's estimates have risen 35 cents to $3.40 per share over the past 60 days. The stock is attractively valued at 17.4x next year's estimate. Read the analysis of VMI now!
Growth & Income – HCC Insurance Holdings, Inc. (HCC)
HCC Insurance Holdings, Inc. (HCC) exceeded analysts’ earnings expectations in 12 straight quarters, and in 15 out of the past 16. Impressive fourth-quarter and full-year results were recently released by the company. Consensus earnings estimates for both this quarter and the full year have risen over the past two months. HCC is currently yielding 1.3% and has a five-year average dividend yield of 1.0%. Read the full analysis on HCC now!
Momentum – Stratasys Inc. (SSYS)
Stratasys Inc. (SSYS) continues to exhibit positive momentum after reporting an earnings surprise in February. The stock has soared past prior resistance on stronger than average volume, supporting the upward trend established in August 2006. Read the analysis of SSYS now!
Value – Brasil Telecom Participacoes S.A. (BRP)
Brasil Telecom Participacoes S.A. (BRP), a Zacks #1 Rank stock, reported solid fourth-quarter and full-year 2006 results in late January. The consensus earnings estimate for this year has risen over the past week. The company has a price-to-book ratio of only 0.96, compared to 4.2 for the market and 2.4 for the industry. Read the full analysis on BRP 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.
Here’s a new screen that was created with the Research Wizard. By popular demand, I’m excited to share it again in this article.
It’s a very robust strategy in and of itself and works exceedingly well with many of our other strategies that come loaded with the Research Wizard program.
I ran a series of separate tests over the last six-year time span using a four-week holding period. Each run was started on a different date to eliminate coincidence and to verify robustness.
In 2001, this screen showed an average compounded gross return of 51.4%.
In 2002, it showed a 36% return.
2003; a whopping 91.2% return.
2004 showed a 35.9% return.
2005 was 44.4%.
And in 2006, the avg. compounded gross returns were 58.4%.
I’ve also been experimenting with a slightly higher percentage of Strong Buys/Buys and have found that 60% does very well too. But anything higher than that starts diminishing returns instead of increasing them.
Give this strategy a try in your own trading and see how it can help you pick better stocks.
This strategy always only picks five stocks per run.
Here are three of them for this week (Tuesday, 4/3/07):
(This strategy is now available in the Research Wizard in the SoW strategies folder.)
Check it out for yourself and get the rest of the stocks on this list. See where your stocks Rank out of all of the other stocks out there, and test your own strategies and see how they’ve done. Find out what works and what doesn’t. It can all be done with the Research Wizard stock picking and backtesting program. Sign up now for your two-week FREE trial to the Research Wizard and start making better decisions today.
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 energy prices again starting to take news headlines these days, we wanted to speak with senior analyst Matthew Thurmond about how the coal industry is getting along these days. He was available for a few questions.
With 2006 numbers in, how did the coal sector fare last year?
Well, coal is a fairly fragmented commodity business, so the key data points to look at are supply, demand and price. Supply for the year was up just under 3%, to around 1.16 billion tons. Surprisingly, demand was actually down about 1% for the year, to around 1.11 billion tons.
More. . .
This base economic squeeze, along with year-over-year pricing declines for oil and gas, led to lower coal pricing. For Central Appalachian coal, pricing has dropped sharply from the post-hurricane peaks we saw at year-end 2005. Last year, per-ton pricing dropped from the high $50’s to around $40. Year-to-date, pricing has remained mostly unchanged, continuing to hover around the $40 mark.
How have producers responded to the lower pricing levels?
As I mentioned in the last interview, many of the larger coal miners have taken steps to curb the price decline. The three miners I cover for example, Arch Coal (ACI), Peabody (BTU) and Consol (CNX), have all been paring production.
The miners I follow all seem to be wary of bringing new supply on the market with the current choppy pricing environment. This production discipline is good for the sector and helps ensure that per-ton rates won’t get driven down sharply. For example, Arch dropped its 2007 production guidance from 140 million tons to just over 130 million and Consol is refusing to increase production unless the market clearly demands it. Peabody, the world’s largest coal miner, is putting off its massive “School Creek” mine build-out until at least 2009. So overall, my coverage base is able to keep pricing and margins stable by curbing their production levels.
Another factor worth mentioning is that larger miners such as these are slightly insulated from near-term spot price volatility. In fact, during the fourth quarter, each of my three miners reported fairly stable year-over-year pricing.
These larger miners benefit from long-term sales contracts. They sign these with utilities that are looking for a reliable supply stream. The miners are usually able to leverage their reliable supply base and negotiate and lock-in more favorable rates than what is seen in the spot market.
Coal gasification is one environmentally friendly way of using coal as a fuel source. Is there any news on the progress of this as a useful technology?
Coal gasification is coming along, but still very slowly. For those who don’t know, the main reason to “gasify” coal is to reduce the pollutants released when it is burned in power plants. If burned as a gas, the pollutants can be more easily separated and in many cases, sold as useful byproducts. Since coal-fired generators producer over 50% of domestic electricity, the widespread adoption of coal gasification plants could significantly reduce air pollution.
Another benefit that has been talked about more and more lately is carbon sequestration. When transforming coal into a combustible gas, the CO2 can be removed in a concentrated stream. This makes it more economical to store the greenhouse gas in, say, a depleted oil well or an underground aquifer.
Matthew Thurmond is a senior analyst covering the coal industry for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Northrop Grumman Corp. (NOC), Bayer AG (BAY), Intevac (IVAC) and Archstone-Smith Trust (ASN). 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:
With the Roth IRA now permanently in place, and since all individuals will have the ability to convert Traditional IRA assets into Roth IRA assets starting in 2010, it is now a good time to strategize whether and what type of tax-deferred accounts to fund for retirement and beyond.
Keep in mind, the IRS is going to give you the tax break on the front end (pre-tax contributions to 401K) or on the back end (tax-free distributions from Roth IRA) but not both. Deciding whether to fund retirement vehicles on a pre- or post-tax basis will be based upon:
By contributing or converting assets into a Roth IRA in addition to assets in a Traditional IRA, you can decide at anytime in retirement whether its more beneficial to take a tax-free distribution or a distribution taxed as ordinary income. What if you are in a lower tax bracket at age 70 ½ years or older? It may make sense to take a distribution from a Traditional IRA and allow the Roth IRA to continue growing. In fact, even after 70 ½ , you can make contributions to a Roth IRA if you have earned income.
The Roth IRA is also an effective planning tool to pass assets down to beneficiaries to be distributed tax-free –the younger the beneficiary, the better!
For those of you who make both pre- and post-tax contributions to your 401k, at the point you leave your company or retire and rollover the assets to an IRA, you have a couple of options.
You will want to go two different directions on the pre- and post-tax portion. The pre-tax portion will go into the IRA Rollover. The post-tax portion can go into a non-qualified account. The other option pertaining only to the post-tax portion is to transfer it into a non-deductible IRA. Depending on your modified AGI (before 2010), you can subsequently convert that portion into a Roth IRA, understanding any growth on the post-tax contributions will be taxed as ordinary income at conversion. The upside is the distributions from the Roth IRA will eventually be tax-free.
Again, whether it makes sense to take these steps will be a function of your proximity to retirement, tax bracket, and also not having too much “stuck” in tax-deferred vehicles creating estate tax exposure. You must consider all these factors in determining the optimal mix between qualified and non-qualified accounts and then determine the appropriate qualified accounts to fund.
Obviously, more options exist today to manage your retirement in a way to keep more money in your pocket. Consequently, these issues have become more complex and require a full-planning process where all scenarios are explored. But by taking these steps now, and determining the optimal amount to defer, you will come out ahead in the long-run.
If you have any questions or want an evaluation on how you have your accounts structured, feel free to contact me at firstname.lastname@example.org
Fritz Fiebig 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.
5. Best of the Zacks $100,000 Challenge
Zacks is conducting a nationwide talent search to find the very best stock pickers. The winner gets a $100,000 dream job with Zacks! . Sign up for free to join the competition, or just read what stocks the leading players are trading on the Zacks Challenge Player Blogs.
Here's what the leading players are saying lately:
ENTERED THIS AM AND NOW ADDING TO URZ (URZ)
TECH STOCKS ARE TRICKY NOW (HPQ)
Beris (Rank #16 with $143,468)
BEST POSSIBLE ENTRY OPPORTUNITY IN THE WORLD’S LARGEST BUILDER OF ELECTRICAL NETWORKS (ABB)
OTHER TOOLS FROM ZACKS
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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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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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