Wednesday - July 25, 2007
Want to view the archive of past issues? Click here.
Manage Profit from the Pros subscription:
1. ZACKS RANK BUY STOCKS
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)
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!
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. 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:
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.
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 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. . .
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.
Steve Biggs, CFA is a senior technology industry analyst for Zacks Equity Research.
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.
Listen to the audio podcast of the Earnings Preview through Zacks' NEW Audio Feature
Listen to the audio podcast of the Earnings Trends through Zacks' NEW Audio Feature
The 20th consecutive quarter of double-digit median EPS growth is almost in the bag. More...
4. ZACKS WEALTH MANAGEMENT
Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Todayís topic is:
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:
Keep in mind that the income generated from bonds is taxed at ordinary income tax rates unless we consider municipal bonds.The recent changes in tax law, that treat some stock dividends at 15%, have taken some attention away from bonds. A person who has higher return expectations and a higher risk tolerance may be better suited in a Dividend Strategy with a high dividend yield and lower beta than the market. But the most important aspect of bonds (and I emphasize good, solid paper) is their value as a safe haven. When equity markets become volatile, money will flow to the safer harbor that bonds provide.
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 firstname.lastname@example.org.
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.
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:
FOLLOW THROUGH ON THE REVERSAL
Beris (Rank #12 with $169,651)
TRADERS BRUSH OFF CREDIT WORRIES
ANOTHER INTERNATIONAL PLAY... (HMIN)
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.
FREE PORTFOLIO TRACKER
Do you believe that these events affect stock prices?
If you answered yes, then how are you staying on top of these changes for your stocks? If you are one of the 55,000 investors who wake up every morning to the Daily Portfolio Updates emails from Zacks.com, then you are all set. If not, then sign up now to get this vital information sent to you daily to help take definitive action to improve your portfolio's performance . Did we mention it's free? Get started now!
We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week.
If you enjoy this e-mail newsletter, then please pass it along to a friend. Simply forward them the link below to sign up for their own free subscription. If you're reading a forwarded copy, sign up for your own, so you get this wealth of information every week. Just click here. THANKS!
Regards and Happy Investing,
Charles Rotblut, CFA
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 ADRís.
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.
To contact us by mail:
Zacks Investment Research
To unsubscribe from receiving "Profit from the Pros" e-mail newsletter, click here.