Thursday - April 5, 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 – Penson Worldwide, Inc. (PNSN)
Penson Worldwide, Inc. (PNSN) is a recent IPO and doesn't have much of an earnings history, but the early results are quite encouraging. This is an under-followed growth story that could generate buzz when it catches onto the mainstream investing public. Over the past month, this year's earnings estimates have increased three cents to $1.47 per share. The stock is attractively valued at 16.8x next year's estimates. Read the full analysis on PNSN now!
Microchip Technology (MCHP) has met or exceeded earnings estimates in each of the past eight quarters. Year-over-year earnings growth has consistently exceeded 20% over this time period. The company pays a 3% dividend yield, which is rare for a technology stock. The stock is reasonably valued at 23.8x next year's estimates. Read the full analysis on MCHP now!
Momentum – Medco Health Solutions Inc. (MHS)
Medco Health Solutions Inc. (MHS) recently reported a positive earnings surprise, raised 2007 guidance, and announced an additional stock repurchase plan. The stock is trading at record highs and looks to continue its upward trend. Read the full analysis on MHS now!
National Oilwell Varco Inc. (NOV) continues to benefit from solid fundamentals, rising oil prices and a solid backlog of new orders. Despite a year-to-date return of 27.8%, the stock continues to trade at a discount to the market and in-line with the industry average. Read the full analysis on NOV now!
2. 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:
STRONG SECTOR: THE UTILITIES #5
Momotrader12 (Rank #361 with $109,887)
STOCKS WITH PENDING ORDERS (SIMO, PACR, MTOX, CYNO, JSDA)
J.J. McGrath (aka MackTheKnife) won the first-quarter Zacks Options Challenge and is currently ranked in 10th place in the Zacks $100K Challenge. In the Options Challenge, he generated a return of approximately 673% in three months. In the Zacks $100K Challenge, he is up an impressive 53%.
This player relies on fundamental research to find stocks with upside. “As a diversified options trader and stock investor, I focus on the equities of companies with compelling growth-and-value characteristics, as well as effective managements,” explained JJ. “On the one hand, I like to see perceived growth in gross revenue, net income, and free cash flow (among other metrics). On the other hand, I like to see reasonable price-to-book, price-to-earnings, and price-to-sales ratios (among other metrics). I also want portfolio companies to have debt-to-equity ratios of 0.5 or less, as well as comparatively favorable returns on assets, capital, and equity.”
J.J.’s number of trades has been below average for most Simulator players, but his choices tend to be profitable. For instance, he held on to Patterson-UTI Energy for seven weeks and closed out the position with a gain. He currently holds Dendreon (DNDN), Vaalco Energy (EGY) and Supergen (SUPG) in his Zacks $100K Challenge portfolio. Take a look at his complete trading history by clicking here.
3. ZACKS EQUITY RESEARCH
Some of you may notice that Food-Confectionery is near the top of the Industry Rank List. This small group is comprised of three Zacks #2 Rank (“buy”) stocks: Hershey (HSY), Toostie Roll Industries (TR) and WM Wrigley (WWY).
Rising commodity prices, particularly sugar and corn, are a concern for all three companies. However, the candy companies are attempting to pass along the higher costs to consumers. For instance, Wrigley recently announced its intention to raise prices by 10% on most products. (WWY and HSY are also engaging in cost-cutting strategies to improve their margins.)
More. . .
Brokerage analysts seem to believe that the companies will have some success in managing the higher commodity costs. Full-year profit projections for HSY are up two cents over the 30 days to $2.55 per share. The sole analyst covering TR has raised his full-year forecast by six cents over the past 60 days to $1.29 per share. Two of the 14 analysts covering WWY have adjusted their projections within the past 30 days, causing the consensus estimate to rise by a penny to $2.21 per share.
Steel Dynamics (STLD) recently raised its first-quarter guidance. The company now expects to earn between 94 and 98 cents per share this quarter versus its previous forecast of 85 to 90 cents per share.
Steel Dynamics’ CEO, Keith Busse, credited “decreased import activity and lower inventories at steel service centers” for improving market conditions. Inventory levels had been a concern for the industry because of higher Chinese production and weak demand by automakers. Brokerage analysts raised their forecasts on STLD following the release of the new forecast, sending the consensus first-quarter earnings estimate up by a cumulative nine cents to 96 cents per share. Full-year estimates are 12 cents higher at $3.82 per share.
There have been some signs of a spillover effect. For example, one analyst raised his second-quarter profit forecast on U.S. Steel (X) within the past week, causing the consensus estimate to move seven cents higher to $2.49 per share. In addition, three of the 14 covering brokerage analysts have adjusted their full-year projections. The new full-year earnings estimate of $9.28 per share is 16 cents higher than a week ago. (The first-quarter consensus estimate is unchanged.)
Both STLD and X are Zacks #2 Rank stocks and are classified in Steel-Producers. This group also contains one Zacks #1 Rank (“strong buy”), Gerdau (GGB), and three other Zacks #2 Rank stocks
Transportation-Trucking contains two Zacks #5 Rank (“strong sell”) stocks – ABFS and MRTN – and eight Zacks #4 Rank (“sell”) stocks.
To read the complete Industry Rank Analysis, click here.
Charles Rotblut, CFA is the senior market analyst for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Starwood Hotels & Resorts (HOT), Winston Hotels (WXH), Pozen (POZN) and Infosys (INFY). To see their latest posts, click here.
4. 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
Profit Tracks: Recent Price Strength
This screen looks for stocks trading in the upper range of their 52-week highs along with attractive Zacks Rank and Broker Ratings. This strategy proves that the "trend is your friend" with a +35.5% return versus +4.9% for the S&P 500 in 2005.
Brush Engineered Materials Inc. (BW) is a Zacks #1 Rank (Strong Buy) company. BW is trading at 52-week highs and has experienced 16.2% growth over the past four weeks. In mid-February, the company posted fourth-quarter earnings of 44 cents per share, five cents above consensus estimates. BW also reported full-year guidance that surpassed expectations. According to company officials, 2007 is off to a more robust start than expected and continues to profit from strong market conditions and progress with key programs. Continue your research on BW now!
SkillSoft PLC (SKIL) recently reported fourth-quarter earnings of eight cents per share, up from four cents in the year-ago period, and two cents above expectations. The 33.3% earnings surprise marked the eighth consecutive double-digit surprise. In addition, the stock was recently upgraded to a “Buy” from “Hold” due to valuation and improving business fundamentals. SKIL is trading at 52-week highs and has experienced over 20% growth over the past four weeks. Continue your research on SKIL now!
GigaMedia Ltd. (GIGM) recently announced fourth-quarter earnings of 17 cents per share, exceeding the consensus estimate by 41.67%. For the first quarter, the company expects solid contributions from its Asian online games business. According to CEO Arthur Wang, “We are seeing but the early returns from our investments and strategic steps to build a dominant online entertainment business.” GIGM has increased by 25.6% over the past four weeks and is currently trading at a new 52-week high. Continue your research on GIGM now!
ICF International Inc. (ICFI) is a Zacks #1 Rank (Strong Buy) company. ICF International reported fourth-quarter earnings of 65 cents per share, reversing last year’s loss and surpassing the consensus estimate by 110%. The outstanding results were largely the result of a large contract related to Hurricane Katrina. The company also forecasted first-quarter and full-year 2007 revenue well above analyst expectations. ICFI is trading near the 52-week high and its share price increased by 26.9% over the past four weeks. Continue your research on ICFI 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 goes over an exciting screening strategy called ‘Best Buys’: Click here.
5. ZacksElite.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...
Priceline.com (PCLN) is a travel service that offers leisure airline tickets, hotel rooms, rental cars, vacation packages, and cruises. The company operates as priceline.com, rentalcars.com, breezenet.com, and lowestfares.com.
The company’s Name Your Own Price service (also called its opaque business) offers customers a unique value proposition by allowing them to name their own price for online products/services. In these transactions, Priceline.com determines the price it will accept and has discretion in supplier selection. PCLN’s value-add to suppliers is that Priceline.com provides a brand preserving sales service that enables them to sell excess inventory without harming their existing retail pricing structure.
Priceline.com’s international business expansion and increased retail offerings continue to be the primary drivers of its overall growth.
The company recently released its financial results for the fourth quarter and full-year 2006. Earnings per share increased on a year-over-year basis in both categories. The fourth-quarter earnings per share result was 36% ahead of the consensus estimate. In fact, four out of the past five consecutive quarters, earnings were above expectations.
Fourth-quarter gross travel bookings improved by 38.3% from the year-ago quarter, while full-year results increased by 49.1% year-over-year.
Revenues in the fourth quarter were up 27.5% from the year-prior. Full-year revenues were $1.1 billion, compared to last year’s $962.7 million.
PCLN stated that two major factors contributed to its over-performance in the fourth quarter. First it was the strong performance of Booking.com, the company’s European business. Second, high retail travel prices during the holidays created strong demand for priceline.com's money-saving domestic services, particularly its Name Your Own Price® option.
Over the past 60 days, next year's earnings estimates have jumped 37 cents to $2.86 per share. Despite the stock's big runup, it is attractively priced at 19x next year's estimates. This is slightly above its long-term growth rate of 17.6%.
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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Regards and Happy Investing,
Charles Rotblut, CFA
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*The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
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