Thursday - September 27, 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% 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)
Listen to the audio podcast on NVT through Zacks' Audio Feature:
NAVTEQ Corporation (NVT) has done a great job navigating for profits. Surging demand for maps in portable devices and some easier-than-expected expenses are contributing to outsized earnings gains. The company just reported a 72% profit gain and raised full-year guidance. Over the past 60 days, this year's estimates have jumped 19 cents to $1.52 per share. The past two quarters have averaged a 57% positive surprise. Analysts are projecting 20.4% growth over the long term. Read the full analysis on NVT now!
Emerson Electric Co. (EMR) exceeded analysts' earnings expectations for 16 straight quarters. Citing strong year-to- date results and solid order trends, EMR recently boosted its full-year outlook and now forecasts 2007 profits between $2.58 and $2.63 per share. Consensus earnings estimates for this year and next year have risen over the past two months. Earnings per share are projected to grow 13% over the next 3-5 years. EMR is currently yielding 2.1%. Read the full analysis on EMR now!
Momentum - Advent Software, Inc. (ADVS)
Advent Software, Inc. (ADVS) is enjoying phenomenal growth and its chart reflects it. The stock has been on a rocket ride since late July, after posting a 350% positive earnings surprise. Over the past 90 days, this year's earnings estimates have soared 12 cents to 33 cents per share. Analysts are projecting 27.8% earnings growth in 2008 and 21.7% growth over the long term. Read the full analysis on ADVS now!
Hornbeck Offshore Services, Inc. (HOS) topped analysts' earnings expectations for the past three quarters by an average margin of 19.2%. In early August, the company reported solid second-quarter and year-to-date results. Consensus earnings estimate for this year and next year are up over the past month. Earnings per share are projected to grow 10% over the next 3-5 years. This Zacks #1 Rank stock has a price-to- book ratio of 1.9, compared to 2.1 for the industry. Read the full analysis on HOS 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:
Lilnev2000 (Rank #95 with $149,214)
HEALTHSPORT, INC. - REPLACE YOUR ELECTROLYTES (HSPO)
Given the projected track of the latter, I believe it probably will affect...
MackTheKnife(Rank #52 with $160,387)
PLAYING THE CHINA CARDS: ACE OF CLUBS, SIMCERE PHARMA (SCR) The Simcere Pharmaceutical Group is a manufacturer and supplier of branded generic pharmaceuticals in China. The Play: With no position in SCR at this time, I plan to buy share when (A) the price is less than $15.12 and (B) the two- period Relative Strength Index (RSI) on its six-month daily chart is less than 10; and I then plan to sell shares when...
The best way to summarize my investment style is "investing in ideas," stated Dan Sullivan (aka: sullyf14). Like the idea he formed a few years ago after reading an article about China in National Geographic, titled "The End of Cheap Oil." The article prompted him to invest in the Energy Select Sector SPDR (XLE) ETF. Dan noted, "Because I had no specific expertise in the oil industry, it was easy to invest in the idea through an Exchange Traded Fund (ETF)."
As we delved a little deeper into Dan's stock market game plan, it became apparent that "investing in ideas" also meant investing in certain industries or sectors via ETFs. He mentioned, "I see investing in ETF vehicles as a fantastic way for ordinary folks to invest in sector/ ideas without the need of extensive industry knowledge. Some of the investment ideas and the corresponding ETFs this market watcher is currently considering include.
Some of the investment ideas that the astute investor is currently considering revolve around water, utilities and nana-technology. He is thinking of playing these fields via the PowerShares Water Resources (PHO), Utilities Select Sector SPDR (XLU) and PowerShares Lux Nanotech (PXN) ETFs.
While Dan does view ETFs as valuable investing tools, he also diversifies beyond these broad investment instruments. Some of the current holdings in his Zacks $100K Challenge portfolio include Anadigics, Inc. (ANAD), Ascent Solar Technologies Inc. (ASTI), JA Solar Holdings Co., Ltd. (JASO), Commerce Bancorp Inc. (CBH) and Force Protection Inc. (FRPT). Take a look at his entire trading history by clicking here.
3. ZACKS EQUITY RESEARCH
Listen to the audio podcast of the Industry Rank Analysis through Zacks' NEW Audio Feature.
The credit crunch has yet to have a meaningful impact on overall expectations for growth. Ahead of the "official" start of third-quarter earnings season, the Zacks Revisions Ratio, which measures the proportion of full-year earnings estimates being revised upwards relative to those being revised downwards over the preceding four weeks, is right about average at 0.82.
To put this number in perspective, I've compiled pre-earnings season trends in earnings estimate revisions for the past two years. These numbers represent the cumulative number of earnings forecasts that have been revised during the preceding four weeks for companies within the Zacks Rank universe.
As you can see, brokerage analysts have not been more cautious (or less cautious) then they have at similar points over the past two years. A big reason is that in the face of a sinking greenback, record highs for crude and tightened lending standards, the economy and corporate profits are continuing to grow. As I stated last week, the median company within the within the S&P 1500 (S&P 500, S&P MidCap 400 and S&P SmallCap 600) is projected to have generated an 8.5% increase in profits during the third-quarter.
More. . .
These numbers do conflict with some of the recent economic data that has been released. August durable goods orders declined 4.9%, the first decline since May. The Conference Board's consumer confidence index sank to a two-year low this month. The National Federation of Retailers predicted that this year's holiday shopping season will be the worse it has been in five years. Even Target (TGT), whose sales had been holding up, recently slashed its September sales forecast. And I'm not even mentioning the housing numbers which just stunk.
So how does one reconcile this difference between the trend in earnings estimate revisions and the recent economic data? Durable goods orders are volatile and a single month's change really does not tell much. The trend over the next few months will be more important, especially if there is a notable, sustained drop because it will suggest that the credit crunch is widening. At this point, I don't believe that such a scenario will develop, but I do acknowledge that it is within the realm of possibilities. Consumer confidence surveys are interesting, but they do not necessarily reflect actual spending habits. A person can say he is more worried about the economy, but continue to visit Starbucks (SBUX) everyday. Retail sales were not strong over the summer, something that has already been factored into earnings forecasts. It is possible that profit projections for many retailers will have to be cut further.
On the other hand, there is evidence that Chicken Little is wrong about the outlook for stocks. There are many countries experiencing stronger growth than the U.S. and this adds to demand for exports. (The weak dollar makes U.S. exports more price competitive, an added plus.) Corporate balance sheets are strong overall. Demand for machinery, parts and technology (e.g. laptop computers), despite today's durable goods report, has been good. There are many companies that are enjoying pricing power. Even in retail, there are several companies that are doing just fine (e.g. Tiffany (TIF) and Zumiez (ZUMZ)). Plus, the U.S. economy is still growing, even if the pace of growth has slowed recently. Simply put, at the aggregate level, conditions for profit growth continue to exist.
Last week, brokerage analysts raised their full-year forecasts on five of the six stocks within Fertilizers. Those stocks were Agrium (AGU), CF Industries (CF), Mosaic (MOS), Potash Corporation of Saskatchewan (POT) and Terra Industries (TRA). All five are Zacks #1 Rank ("strong buy") stocks.
The upgrades reflected optimism that these companies will continue to enjoy pricing power for the foreseeable future. Demand for potash and fertilizer have been strong and are expected to remain so. It's also worth noting that the upward revisions to estimates occurred as grain prices and other agriculture-related commodities are setting either record or 52-week highs.
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 Alnylam Pharmaceuticals (ALNY), Affirmative Insurance (AFFM), Biovail (BVF) and Barclays PLC (BCS). 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 we highlight...
Profit Tracks: Growth and Income
This screen looks for stocks that are paying dividend yields of greater than 8% along with other attractive fundamental attributes. Although this screen is based on a long-term and lower risk approach to investing, it has a history of outperforming the S&P 500.
BlackRock Kelso Capital Corporation (BKCC) satisfies the criteria for this Profit Track with a current dividend yield of 11.63%. The company released its second-quarter report in early August. The report included a third-quarter dividend declaration of 42 cents per share, payable on September 28, 2007 to stockholders of record as of September 14, 2007. Second-quarter earnings per share totaled 42 cents, topping the consensus estimate by 8%. Continue your research on BKCC now!
Gramercy Capital Corp. (GKK)recently declared a quarterly dividend of 63 cents per share, noting that it is payable on October 15, 2007 to shareholders of record at the close of business on September 28, 2007. In mid-July, the company posted second-quarter funds from operations (FFO) of 82 cents per share, eclipsing the year-ago total of 58 cents and surpassing the consensus estimate by 21%. Total revenues of $78.3 million increased from last year's second-quarter result of $43.5 million. GKK's current dividend yield stands at 9.65%. Third-quarter results will be available on October 18, 2007. Continue your research on GKK now!
Medical Properties Trust, Inc. (MPW) declared a quarterly dividend of 27 cents per share in mid-August. The dividend will be paid on October 19, 2007 to stockholders of record on September 14, 2007. In early August, the company announced second-quarter funds from operations of 29 cents per share, surpassing the previous year's 24 cents and matching the consensus. Medical Properties Trust stated that its portfolio as a whole continues to show operating performance improvement, further strengthening the company's financial position. MPW offers a current dividend yield of 8.01%. Continue your research on MPW now!
Ship Finance International Limited (SFL) sports a current dividend yield of 8.21%. In late August, the company reported second-quarter results and declared a quarterly dividend. The dividend amount was 55 cents per share, which was paid out in mid-September. Second-quarter earnings per share were roughly 3% above the consensus estimate. Continue your research on SFL 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 looks at the 'short ratio' as a market sentiment indicator, and shows how to use if for picking winning stocks. 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) continues to outperform and reach all- time highs. 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 also has a more traditional travel sales model that allows customers to choose specific suppliers and inventories. Under the retail model, Priceline.com acts as an agent for the airline, hotel or rental car company and the supplier is the merchant of record. The company was founded in 1997 and went public in March 1999. Priceline.com's international growth and strong operating leverage continue to help the company deliver robust growth. The company's continued shift into retail airline tickets, non-air products (hotels, rental cars, and travel packages), and into Europe should enable the company to produce solid long-term earnings growth. The company recently released results for the second quarter. In addition to earnings per share delivering strong outperformance on a year-over-year basis as well as in relation to the consensus estimates, Priceline.com's GAAP revenues of $355.9 million increased by 15.7% from the previous year's second quarter. The company also noted that gross travel bookings, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 33% year-over-year to $1.2 billion. "Priceline.com's earnings performance in the second quarter exceeded our previous expectations for both the international and domestic businesses," said priceline.com President and Chief Executive Officer Jeffery H. Boyd. "Internationally, Booking.com's results were driven by 93% growth in gross bookings, which continues to outperform market growth rates. Domestic gross bookings fell within the range of our guidance, but earnings growth exceeded our expectations due to strong organic growth in merchant hotel and rental cars and more efficient marketing." Analysts are optimistic about the company's future as evidenced by their earnings forecasts. Current third-quarter estimates of $1.22 per share increased from 99 cents over the past 60 trading days. Expectations for the full-year 2007 are currently pegged at $3.31 per share, up from the two months- ago level of $2.77. The author of this article owns shares of PCLN.
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.
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 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.
To contact us by mail:
Zacks Investment Research
To unsubscribe from receiving "Profit from the Pros" e-mail newsletter, click here.