Wednesday - October 3, 2007
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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 - Millennium Pharmaceuticals, Inc. (MLNM)
Millennium Pharmaceuticals, Inc. (MLNM) hasn't seen its share price move for several years, but that could be about to change. The company's drug for multiple myeloma, Velcade, shows excellent promise and could be a boon for the bottom line. Over the past 90 days, next year's earnings estimates have increased 33%. Analysts expect the company to break even this year and generate a profit of nine cents per share next year. Read the analysis of MLNM now!
Growth & Income - Corn Products International, Inc. (CPO)
Corn Products International, Inc. (CPO) exceeded analysts'
earnings expectations in four out of the past five quarters by an average margin of 28.4%. In late July, the company reported impressive second-quarter and first-half results.
Earnings per share are projected to grow 11% over the next 3-5 years. On Sep 19, the Board of Directors announced a 22% boost in its regular quarterly cash dividend to 11 cents per share. CPO is currently yielding 0.78%. Read the full analysis on CPO now!
Momentum - Baidu.com (BIDU)
Baidu.com (BIDU) has parlayed its explosive growth into massive stock price gains. China's booming economy certainly doesn't hurt this company's prospects. The chart is looking good, although some sideways action could clearly help the overbought status. Other than that, things are looking great for the company. Four out of the past five quarters have resulted in huge earnings surprises. Read the analysis of BIDU now!
Value - Insight Enterprises, Inc. (NSIT)
Insight Enterprises, Inc. (NSIT) exceeded analysts' earnings expectations in three out of the past four quarters. In early August the company reported strong second-quarter results. Consensus earnings estimates for both this year and next year are up over the past two months. Earnings per share are projected to grow 15% over the next 3-5 years. This Zacks #1 Rank stock has a price-to-book ratio of 1.7, compared to 1.8 for the industry. Read the full analysis on NSIT 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.
"Great Stocks Often Have Great Peers"
As we've mentioned before, nearly half of a stock's price movement is tied to the performance of its respective group (Sector and Industry).
That being said, most great stocks from great groups often have some great peers as well.
If you find yourself in a killer trade (or wish you were in one), take a look at the characteristics of THAT STOCK and then hunt within its group to find OTHER STOCKS that share the same characteristics.
Does a certain outstanding stock exhibit great sales growth? I'm sure there are at least a few within its group that are also showing similar numbers.
What about increasing margins? If the stock is doing well, it's likely that the industry itself is experiencing meaningful increases in margins too.
This type of screening is often called `modeling'. Figure out the components of what makes something successful and concentrate on that.
If you're in love with a certain stock or sector, but it's not doing anything or even moving against you, then move on.
If you see great stocks in great groups while you're stuck in laggards or non-movers, find what stocks are successful and model them.
If the winningest stocks in a particular sector or industry are trading at PE ratios that you generally won't consider, ... instead consider this; if you had considered them, they would be winning for you.
So therefore, see what characteristics some of the best stocks have in common and try getting on some of those.
Here's something to start you off.
The top four Sectors based on the percentage of stocks at (or within 10% of) their 52 week highs are listed below:
Here are a few stocks (one from each of those Top Sectors) for Tuesday, 10/2/07):
Now try screening for stocks in the Sectors that are in the best Industries.
In fact, in the Research Wizard, you can rank the Industries on whatever item you choose. (Same thing for the Sectors.)
Want to find the `best' Industries based on the Zacks Rank? You can. What about the highest ROE or biggest Earnings Estimate Revision? No problem. Whatever items you want to use to rank your Industries can all be done with a few clicks of the mouse.
Then, you can even narrow it down to the best stocks within those groups - again, based on whatever criteria you choose
To search for the best stocks (and Groups) yourself, sign up for your two-week FREE trial to the Research Wizard. Remember the key to successful screening is in discovering those screens that have produced profitable results in the past. That's exactly what you get with the powerful Screening and Backtesting ability of Research Wizard. You can do it. Learn how, 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
While investors in the U.S. consider looking abroad for strong investments and diversification, we are fortunate to be able to speak with Zacks senior foreign technology analyst Robert Perri, CFA about how the technology sector in Europe and elsewhere is progressing nowadays.
In general, how did last earnings season go for foreign technology companies?
Q2 earnings season was actually a lot like the first quarter in that a lot of the companies reported solid results, but they've been very cautious about what they expect in the second half [of the year]. Only a select few companies have raised their guidance. In fact, many companies have maintained their guidance after beating estimates in the second quarter. So they're actually effectively lowering guidance for the second half of the year, despite strong results in the second quarter.
More. . .
Are there any specific success stories that you've seen in Q2?
NDS (NNDS) did well. They report in U.S. dollars even though they're based in Europe, so the dollar helped their revenues a bit, but it also hindered their margins. But they were still able to cut costs strong enough that it didn't affect their margins so well.
I think 60-70% of their expenses are based in the euro or British pounds - and much less than that of their revenues are derived in those regions. So they overcame that hit to margins, and still reported a great quarter.
Another company that actually did pretty well was SAP (SAP), despite the weakness of the dollar. SAP reported a pretty solid quarter, despite the fact that they had the currency smacking them in the face. We expect SAP to have another solid quarter, if Oracle's earnings are any indication of how the industry is doing.
Would you say in general the weak U.S. dollar has helped or hindered your companies more?
A combination of both. Some companies, such as Greenfield Online (SRVY), Business Objects (BOBJ), Turkcell (TKC) and Siliconware Precision Instruments (SPIL), that report in U.S. dollars but are based overseas - Greenfield Online is actually based in the U.S., but a lot of their sales come from overseas, and the same thing for Business Objects - saw the weak dollar actually help them because they have a lot of sales in euros and British pounds and other foreign currencies.
Whereas some companies - as I mentioned, SAP, and some of the Indian outsourcers I follow, Siemens (SI), Phillips (PHG), and actually pretty much the whole, entire European semiconductor industry - have been hit pretty hard by the weak dollar. Because most of those companies derive their revenues in dollars, but most of their expenses are in the euro. This should be a continuing problem in the third quarter, as the dollar continues to weaken to all time lows against the Euro.
Robert Perri, CFA is a senior analyst covering the foreign technology markets for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Visteon Corporation (VC), Advance Auto Parts (AAP), Lear Corporation (LEA) and Penske Auto Group (PAG). To see their latest posts, click here.
Listen to the audio podcast for the Earnings Preview through Zacks' NEW Audio Feature
In recent years, there has been three positive surprises for each disappointment, but the early returns for Q3 are not as good. More...
4. ZACKS WEALTH MANAGEMENT
Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Todayís topic is:
With our natural inclination towards fear and greed, we must ask ourselves whether we are "hard wired" to be good investors. Take a moment to review your investment decisions over the last ten years. Those decisions, for most people, ranged from chasing technology returns (after it was too late) to sitting in CDs earning 3%-4% while the market moved up over 30% in 2003. I used to like roller coasters as a kid but as I have grown older and wiser I have become more honest with myself. Now I follow a much more disciplined approach by letting Ben Zacks manage my assets.
The returns we saw, for example in 2002 when the market was down over 20% and up over 30% in 2003, creates situations in which we are driven by fear and greed. We are not "put together" to make the right investment decisions because we are mainly acting on emotions. These two years are what we know as "outliers" because they deviate beyond historical mean returns. I truly believe that in the long-run everything returns to its historical average. We have seen this occur within the technology sector, we are seeing that currently in real estate, and we will eventually see that in the international arena.
My best advice is to step back and count to ten before selling at lows and buying at highs. Or better yet, do not look at your portfolio on a daily basis. Do not lose the forest in the trees! What has happened in the past is water under the bridge - DO NOT TAKE ON TOO MUCH RISK NOW ATTEMPTING TO MAKE UP FOR LOSSES IN THE PAST! The market historically returns about 10% on an annual basis- not 20% (I refer you to Exhibit A - Sowood Capital, led by one of the brightest managers from Harvard, annualized 19% over the last ten years until it crashed just a couple of weeks ago).
The transparency of the stock market always allows us to see the risk/volatility on a moment by moment basis right in front us. Real estate, however, lacks this transparency and people presume that it appreciates in a straight line which is not the case. By being in the market, we can be rewarded with good returns by taking on risk. We are able to decide how much risk we want to take, and subsequently how much of a return we may receive.
Find an allocation that will work for your long-term objectives and risk parameters. Feel free to contact me at 888-600-2783 x 9251 to discuss an appropriate allocation for yourself.
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:
Mighty Mo Mo
SOARING SOLAR STOCKS
CHNR NEARING SEVEN-YEAR RESISTANCE AT $20 (CHNR)
MackTheKnife (Rank #39 with $171,458)
EMERGENT BIOSOLUTIONS SEES BIOTHRAX Q3 REVENUE CIRCA $42MM
OTHER TOOLS FROM ZACKS
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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.
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Regards and Happy Investing,
Charles Rotblut, CFA
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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.
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