Wednesday - July 25, 2007

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Zacks #1 Rank stocks average a 32.2% 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 - NAVTEQ Corporation (NVT)

NAVTEQ Corporation (NVT) is navigating its way to huge profit gains. In early May, the company blew away forecasts by over 63%. NVT will be releasing second-quarter results today. Analysts expect 27 cents per share, which is a penny higher than the forecast of a month ago. The company has exceeded earnings in each of the past three quarters. Over the past three months, this year's earnings estimates have risen nine cents to $1.33 per share. The stock sports an impressive ROE of 19%. Read the analysis of NVT now!
 

Growth & Income - Rockwell Automation, Inc. (ROK)

Rockwell Automation, Inc. (ROK) topped the consensus earnings estimate in six of the past seven quarters. After reporting solid third-quarter results, the company boosted its full-year profit guidance to between $3.65 and $3.70 per share. Analysts responded to the company's positive guidance by raising their earnings estimates for both this year and next. On Jun 8, the Board of Directors declared a quarterly dividend of 29 cents per share on its common stock. ROK is currently yielding 1.66%. Read the full analysis on ROK now!
 

Momentum - Apple Inc. (AAPL)

Apple Inc. (AAPL) reported EPS growth of over 70% for the fiscal third quarter. The company's track record of earnings surprises, increasing full-year estimates and iPhone enthusiasm should continue to further the stock's positive momentum. Read the analysis of AAPL now!
 

Value - Freeport-McMoRan Copper & Gold, Inc. (FCX)

Listen to the audio podcast on FCX through Zacks' NEW Audio Feature.

Freeport-McMoRan Copper & Gold, Inc. (FCX) recently reported strong second-quarter and year-to-date results, fueled by its acquisition of rival Phelps Dodge in March along with increased metal pricing. Analysts responded by upping their profit forecasts for both this year and next. Earnings per share are projected to grow 31% over the next 3-5 years. This Zacks #1 Rank stock has a price-to-book ratio of 2.7, compared to 4.6 for the market and 4.2 for the industry. Read the full analysis on FCX now!

 
Zacks Rank Resources

• Zacks Rank Homepage. Go there now.
   
• Zacks Momentum Trader: Discover the best Zacks #1 Rank momentum stocks to buy now. Click here now.
   
• Zacks Rank Breakout Trader: When a stock moves quickly to a Zacks #1 Rank, this trading service uses that turnaround to make 55% a year. Learn more
   
• Zacks Options Trader: Combine the timeliness of Zacks #1 Rank stocks with the explosive profit potential of options. Learn more...
   
• Zacks Wealth Management: Own all the Zacks #1 Ranked stocks in a portfolio managed by Zacks. Learn more...

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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. Learn more about the Research Wizard.
 

"Relative Price Strength Screen"

The last week or two has been a tough market. And even though I remain positive on the market, here's a screen that doesn't need a bull market to succeed.

In fact, in this week's screen, I'm going to go over a Relative Price Strength screen that's been beating the market in both good times and bad.

The parameters to this screen are as follows:

• Zacks Rank <= 2
  (Only Buys and Strong Buys)
   
• Avg. Broker Rating = 1 (Since Brokers are typically bullish `everything', they have to be fully on board.)
   
• Relative % Price change - 12 weeks >= 15 (I'm looking for stocks that are outperforming the S&P 500 by 15% or greater over the last 12 weeks.)
   
• % Price Change - 12 weeks >= 5 (Simply beating the S&P is not enough. They also have to be up in price in absolute terms by 5% or more.)
   
• Current Price/52 Week High >= .80 (I'm looking for stocks that are trading at greater than or equal to 80% its 52 Week High, i.e. no more than 20% from its 52 Week High. Only stocks high up in their uptrend are allowed.)
   
• Current Price >= 5 (They all have to be trading at a minimum of $5 or higher.)
   

The Results:

I ran a series of tests using a four-week holding period over the last five-year time span. Each test was started on a different start date to eliminate coincidental performance and to verify robustness.

In the bear market of 2002, this strategy showed an average compounded gross return of 13.5%.

In the cake-walk of 2003, it showed a whopping 102.9%.

In 2004, the strategy showed an average compounded gross return of 48.9%.

In 2005, the returns were 64.6%.

And in 2006, the returns came in at 22.6%.

Here are three stocks that pass this screen for 7/31/07:

Learn how to find winning stocks in any market. Test this screen and others or build your own strategies and test them. It can all be done with the Research Wizard.Sign up for your free trial now.

Discover all the Free Screening Tools on Zacks.com now!

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.

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With quarterly earnings reports just ahead for many retail companies, we wanted to take this opportunity to speak with senior retail industry analyst Rob Plaza, CFA about his outlook on this group, and where he might be seeing the strongest plays going forward.

Rob, the last time we spoke, you mentioned a lot of the negatives in retail were already out there. With the pullback in the market recently, is this a good time to start buying retail?

You know, I've been getting more bullish as the prices have come down. In our last few conversations and things I've been writing in my reports, I've been kind of neutral to even slightly bearish on a lot of the retail names throughout the first part of the year. I was predicting we'd have better prices come summer, just in time for the "back-to-school" season, and it looks like that's what's bearing out.

More. . .

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Zacks Equity Research continued...

Is that basically what the seasonal condition is right now - the "back-to-school" buying market?

Yeah. I mean, for a lot of the most successful retailers, they typically don't have the big seasons, where they're relying just on back-to-school or just on Christmas. They have the merchandise and the apparel that consumers want to buy today, and wear it when they get home. But for a good chunk of the retailers, this is a big season that's coming up. This is their bread and butter: back-to-school, and then Christmas.

Obviously, we're seeing some really negative numbers on home sales, mortgage credit and the like. Are these particularly bad numbers expected to have an even bigger negative impact on retail sales than originally thought?

On overall retail sales, yes. But keep in mind that overall retail sales includes autos, large ticket items. They include washers and dryers, big-screen TVs - anything that you have to finance. And those are going to get hit much harder than much smaller, lower price-point items. A pair of pants at forty bucks, you're not going to have to tap into home equity to buy those kinds of goods. So those aren't going to be affected as much as the large-ticket items.

As far as top Buy recommendations at this point, what recommendations would you make for us?

I still like names on the high end of retail, like Saks, Inc.

(SKS) and Nordstrom (JWN). I'm still a big fan of the video game cycle - I like GameStop (GME). And I like some teen apparel names. I recently upgraded Zumiez (ZUMZ) from a Hold to a Buy.

You had a Buy on that company for awhile, then you pulled it back, what, on valuation?

Yeah, it was pretty much valuation. And it's a volatile stock. For retail investors looking at specialty retail names, you've got to kind of give a little more leeway - or give these stocks a leash - because they do flop up and down quite a bit more than the normal stock; they're much more volatile.

Read the complete ANALYST INTERVIEW.

Steve Biggs, CFA is a senior technology industry analyst for Zacks Equity Research.

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MORE FROM ZACKS EQUITY RESEARCH...
 

Analyst Blog

Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Flextronics (FLEX), CME Group (CME), Bayer AG (BAY) and Becton, Dickinson (BDX). To see their latest posts, click here.

 
BULL OF THE DAY

Bayer AG (BAY) - Positive Expectations. For full Zacks research report, click here.

 
BEAR OF THE DAY

Millennium Pharmaceuticals (MLNM) - Needs to Diversify. For full Zacks research report, click here.

 
EARNINGS PREVIEW

Listen to the audio podcast of the Earnings Preview through Zacks' NEW Audio Feature

The Week of July 30 - August 3

The earnings calendar for this week contains 49 REITs and real estate companies, thirteen banks and eight investment banks. More...

 
EARNINGS TRENDS

Listen to the audio podcast of the Earnings Trends through Zacks' NEW Audio Feature

On Track for 20th Quarter of Double-Digit Growth

The 20th consecutive quarter of double-digit median EPS growth is almost in the bag. More...

 
Rating Upgrades

Find out which stocks have been recently upgraded by Zacks Equity Research: click here.

 
Zacks Equity Research Buys

Read the reports on all of the stocks on the Zacks Equity Research Buy List: click here.

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Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Today’s topic is:

 
The Neglected Asset Class - Until Now

Bonds, as an asset class, have been quite passe over the last few years in the current low interest rate climate. However with the recent volatility in the stock market, you were probably quite happy if you had bonds in your portfolio. The question still remains how much exposure makes sense at the current level of interest rates. To best answer that question, we need to review what role bonds play in a portfolio.

The purpose of holding bonds is threefold:

• Generate cash flow from income payments
• Dampen volatility in an equity portfolio
• Preserve principal

Keep in mind that the income generated from bonds is taxed at ordinary income tax rates unless we consider municipal bonds.

But do bonds really preserve principal? They will as long as they do not default and are held to maturity. The main risk that bonds carry is interest rate risk. If the market is anticipating the Federal Reserve will continue to raise interest rates, the value of bonds will fall. So during a rising interest rate climate, expect your bond allocation to be a drag on your overall portfolio return. As the yield curve will tell us, which is now inverted (shorter-term rates higher than longer-term rates), we will want to stay on the shorter end of the curve.

If a person needs greater cash flow than a bond can provide, another alternative is a hybrid security such as a preferred stock. Our Preferred Strategy currently yields about 7 %. Keep in mind there is still interest rate risk for a preferred stock and there is no assurance, as there is with a bond, that principal will be paid at maturity.

Your total bond exposure should be based upon your objectives and risk parameters as well as from how much income you need from your assets. It is important to always keep an eye on the yield curve and anticipate future moves by the Fed.

If you have any questions or are looking for more income and/or insulating your portfolio from the various risks we discussed, do not hesitate to contact me at ffiebig@zacks.com.

Fritz Fiebig a Certified Financial PlannerTM 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.

Learn more about Zacks Wealth Management now!

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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.
 

Best of the Zacks Challenge Player Blogs

Here's what the leading players are saying lately:
 

DreyerD

FOLLOW THROUGH ON THE REVERSAL
We are getting a nice pop again off the short term bottom. After trying multiple times to get out with huge gains on the inverse etfs, I will now stocks with them again. My view on the market follow through today is...

Read More or Comment on this post.
 

Beris (Rank #12 with $169,651)

TRADERS BRUSH OFF CREDIT WORRIES
After five days of a breakdown fall, stocks are rebounding for two days in a row now, brushing off recent events and citing credit worries as being overdone... Global equity markets are burning through resistance levels to the upside trying to recoup the levels lost last week... Europe rebounded and Asia advanced as well, as worries that...

Read More or Comment on this post.
 

Weberse

ANOTHER INTERNATIONAL PLAY... (HMIN)
HMIN, or Home Inns & Hotels Management Inc., manages hotel chains in China. It currently has approximately 100 hotels that it leases and operates and over 50 franchised hotels under management as well... It became publicly traded in the US last year, so it is still fresh and unrecognized by most on Wall Street. This is a booming market in China where...

Read More or Comment on this post.
 

Read all the Player Blog posts.

OTHER TOOLS FROM ZACKS

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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:

• +32.2% average annual return since 1988 versus +12.1% for S&P 500
• +43.8% total return from 2000 to 2002 - the worst bear market in over 60 years.
• +23.7% in 2006 and +17.8% in 2005

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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• Broker Recommendation changes
• Earning Estimate revisions
• Earnings Surprises

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We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week.

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Regards and Happy Investing,

Charles Rotblut, CFA

Senior Market Analyst
Zacks.com

p.s. What is the mission for Zacks Profit from the Pros? Click here to find out how we will help you become a more successful investor.

Zacks Rank performance is the total return (price changes + dividends) of equal weighted portfolios, consisting of those stocks with the indicated Zacks Rank, assuming zero transaction costs. These returns are not the result of a backtest; these are actual returns since 1988. The stocks in the Zacks Rank portfolios were available to Zacks clients before the beginning of each month (monthly rebalancing). Performance results from 1988 through September 2006 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADR’s.

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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