Friday - October 5, 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 - Cymer, Inc. (CYMI)
Cymer, Inc. (CYMI) is the king in its own niche market. Management has stated that industry conditions are improving which is great news for shareholders. The company posted a 31% earnings surprise in its latest quarter and earnings estimates have risen. Over the past 90 days, this year's estimates have increased seven cents to $2.37 per share. Analysts are expecting earnings to jump 22.8% next year. Read the full analysis on CYMI now!
Listen to the audio podcast on MW through Zacks' Audio Feature.
The Men's Wearhouse, Inc. (MW) exceeded analysts' earnings expectations for 16 straight quarters. In addition to posting strong second-quarter results, the company raised its full- year profit outlook to between $2.98 and $3.02 per share. Moreover, MW announced a replenishment of the company's share repurchase program up to $100 million. On Jul 27, the Board of Directors declared a quarterly cash dividend of six cents per share of common stock. This Zacks #1 Rank stock has a current dividend yield of 0.47%. Read the full analysis on MW now!
Celgene Corporation (CELG) is growing strongly due to an array of products. Over the past 90 days, this year's earnings estimates have jumped seven cents to 98 cents per share. The company has posted double-digit earnings surprises for four consecutive quarters. Analysts are projected earnings to leap 59.5% in 2008 after triple-digit gains this year. Technically, the chart is looking great as the stock just hit new highs. Read the full analysis on CELG now!
PartnerRe, Ltd. (PRE), a Zacks #1 Rank stock, exceeded analysts' earnings expectations in eight out of the past nine quarters. PRE has returned additional value to its shareholders through both stock buybacks and dividend payments. The company has a current dividend yield of 2.2%. Consensus earnings estimates for this quarter and for the full year are up over the past 30 days. PRE has a price-to-book ratio 1.2. Read the full analysis on PRE now!
2. 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: Low Price Stocks
Many investors prefer stocks priced below $20 because the low prices allow them to accumulate more shares. Fortunately, lower prices do not necessarily mean lower quality.
This strategy identifies stocks priced below $20 that are trading at discount valuations and have a Zacks Rank of #1 ("Strong Buy") or #2 ("Buy"). The stocks identified by this search strategy trade at price-to-sales (P/S) multiples of 1.0 or below. The strong Zacks Rank is indicative of positive revisions in earnings estimates. Combining these characteristics can result in high-dollar returns.
Here are four stocks that make the grade for the Low Price Stocks Profit Track:
Delta Apparel, Inc. (DLA) posted fiscal fourth-quarter results and declared a quarterly dividend of five cents per share in mid-August. Earnings per share were roughly 79% ahead of the consensus estimate. The company noted that during fiscal year 2007, it achieved a 15.7% sales increase to reach a record $312.4 million in sales. DLA meets the criteria for this Profit Track as evidenced by its price-to-sales multiple of 0.45 and earnings per share profitability of $1.24 over the past 12 months. Continue your research on DLA now!
HealthSpring, Inc. (HS) released results for the second quarter in late July, which included a total revenue increase of 14% on a year-over-year basis. HealthSpring updated its full-year 2007 guidance to a range of $1.33 to $1.43 per share. Analysts are in agreement as evidenced by current Wall Street forecasts of $1.42 per share. Three months ago, the 2007 consensus estimate stood at $1.29. The company offers a price-to-sales multiple of 0.81. During the past 12 months, HS earned $1.34 per share. Continue your research on HS now!
Ingram Micro, Inc. (IM) saw earnings per share profitability of $1.62 over the past 12 months. The company's price-to-sales multiple stands at 0.10. In late August, Ingram Micro reaffirmed its third-quarter outlook of 38 cents to 40 cents per share. The guidance is in line with current analyst estimates of 39 cents, a forecast that has increased by a penny over the past 90 trading days. Results for third quarter will be available on October 25, 2007. Continue your research on IM now!
MGP Ingredients, Inc. (MGPI) declared a semi-annual dividend of 15 cents per share in late August. The dividend was paid on October 3, 2007. In mid-August, the company released fiscal fourth-quarter results, noting that the year consisted of record sales and profits as well as several other notable achievements. MGPI's price-to-sales multiple is 0.45. The company earned $1.04 per share over the past 12 months. Continue your research on MGPI 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”.
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Kevin Matras looks at the `short ratio' as a market sentiment indicator, and shows how to use it for picking winning stocks: More...
3. ZACKS EQUITY RESEARCH
We're joined today by senior retail industry analyst Rob Plaza, CFA, who is here to discuss what investors should be expecting from the industry ahead of third quarter earnings, and before the holiday shopping season starts.We haven't seen a lot of positive news for retailers lately, but might the lowering of the fed funds rate in the last couple weeks provide a little more cushion for consumers? I'm of the opinion that it'll help - a little bit. But, I mean, it still doesn't change any of the structural problems. It's not as though people weren't able to borrow money, either on their credit cards or from accessing home equity loans. It's that people, especially in the sub-prime area, were having problems paying back those loans. So no matter how low the interest rates go, if you have trouble paying back what you owe, you're still going to have trouble paying back what you owe at a lower interest rate.
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So you're not necessarily thinking it's going to be something that's going to rescue the retail industry ahead of the holiday season?
Not from a fundamental perspective, but, I mean, one of the reasons that the Fed did lower the rates was obviously to help the credit and liquidity crisis that was going on over the summer. But it kind of helps to instill confidence in consumers, and ultimately that's what it comes down to - if you're confident that you're going to have your job going forward, and continue to make the same salary or get your annual raise, you're going to be confident that, "OK, I can go out and spend that money." So it really lends itself more from a psychological perspective as opposed to a fundamental one, in my opinion.
Wal-Mart is a clear bellwether for this industry, and I know it's not in your coverage, but do you think its recent analyst upgrade might signal a rosier holiday season, or is this more likely because Wal-Mart is just trading near its 52-week low, in your opinion?
Like you said, I don't cover Wal-Mart (WMT), but I'm definitely not a fan of the company or the stock. Wal-Mart is just not a very good merchandiser; people don't enjoy their shopping experience in a Wal-Mart store. Wal-Mart is basically a place you go to spend the least amount that you can. And Wal-Mart is targeting people who are very, very price sensitive in what they're spending, and that lower income consumer is having the hardest time in this environment.
So I disagree with the upgrade. I would actually look at any pop in Wal-Mart's shares as a reason to sell, or at least reduce position.
Fair enough. What are you currently predicting, then, for this holiday season?
Well, I definitely think we're going to see a slowdown versus previous years, but - and it's a cliche at this point - but you can't count out the American consumer. We're going to spend until credit card companies or department stores won't give us the money to go out and spend. The growth rate is going to come down a little bit, and I'm still looking at a one-and-a-half to two-and-a-half percent growth over fourth quarter of last year.
So it's still in a positive direction, even though it might be a little bit-
It would be roughly half of the growth we saw last year. And going back to last year, there were a lot of news stories about the consumer being skittish last year. And that was not a blow-out year, but it was a pretty good year [for holiday retail].
Let me ask you this: it seems that ahead of holiday season, the predictions are that retail is not expected to do as well as it did in previous years, and then the numbers come out and they're actually fairly favorable. Is this built-in to the way people are to treat retail industry stocks?
Rob Plaza, CFA is a senior analyst covering the retail and specialty retail industries for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include BioMarin Pharmaceuticals (BMRN), NDS Group (NNDS), Stoneridge (SRI) and Comstock Resources (CRK). To see their latest posts, click here.
Listen to the audio podcast of the Industry Rank Analysis through Zacks' NEW Audio Feature.
Listen to the audio podcast of Earnings Trends through Zacks' NEW Audio Feature.
4. INVESTMENT IDEAS
The editors at Zacks.com constantly analyze the universe of stocks to find the best investment ideas. Today, learn how you can profit from the Dogs of the Dow strategy:
The Dogs of the Dow is an investing strategy that was introduced to the world in 1991 by Michael O'Higgins in his book, "Beating the Dow." The Dow, in Dogs of the Dow, refers to the Dow Jones Industrial Average-the oldest (developed way back in 1896 by Charles Dow) and most widely recognized index of U.S. stocks. But what exactly constitutes a Dog? Furthermore, how successful has this strategy been?
In a nutshell, The Dogs of the Dow strategy involves the purchase of equal dollar amounts of the 10 Dow Jones Industrial stocks with the highest dividend yields. Then one is to hold these companies for exactly one year. When the year comes to an end, the portfolio is then adjusted to reflect the new stocks that the dogcatcher has rounded up.
Dividend yield is calculated by dividing a company's dividend by its current stock price. The resulting high yielding stocks that make up the investment portfolio are the ones with prices that are low relative to the dividend paid. These may be stocks that are out of favor with the hope being they will rebound in the next year, fail to make the portfolio (because their prices have hopefully risen, driving down their yield) and be replaced with a new litter of underpriced stocks. After all, companies that make up the Dow Jones Industrial Average are well-known, mature companies with strong balance sheets and financial strength, correct? Companies like this cannot stay undervalued for too long.
In 2006, the Dogs of the Dow returned 24.8%. For comparison purposes, the Dow Jones Industrial Average and the S&P 500 returned 16.3% and 13.6%, respectively. Enjoy the below commentary on a few of the current hounds.
Verizon Communications, Inc. (VZ)
Verizon Communications is presently the nation's second- largest provider of communications services offering local phone service, long distance, wireless and data services. The company's Wireline business provides telephone services, including voice, network access and nationwide long-distance services, broadband video and data services, and other communications products and services globally in 150 countries. Its domestic wireless business, operating as Verizon Wireless, provides wireless voice and data products and services across the United States.
On Jul 30, VZ reported second-quarter profits of 58 cents, which matched the consensus earnings estimate. The company has met or topped the Street's earnings estimate in 16 consecutive quarters. Revenues came in at $23.3 billion, up 6.3% from the prior-year period. On the wireless side, revenues grew 17.1% year-over-year to $10.8 billion. As far as its wireline business, revenues fell 1.1% to $12.6 billion. During the first half of 2007, VZ repurchased $952 million worth of shares. The company agreed to buy Rural Cellular for $45 a share in cash, or $720 million, in late July. On Sep 6, the Board of Directors declared a quarterly cash dividend of 43 cents per share, equating to an increase of 6.2% when compared to the previous quarter. VZ has a current dividend yield of 3.6%.
E. I. du Pont de Nemours and Company (DuPont) (DD)
DuPont operates and manufactures a range of products for distribution and sale to many different markets, including the transportation, safety and protection, construction, motor vehicle, agriculture, home furnishings, medical, electronics, communications, protective apparel, and the nutrition and health markets. DD operates in more than 70 countries.
On Jul 24, the company posted second-quarter earnings per share of $1.04. DD reported profits of $1.01 per share in the prior-year period. Sales climbed 6% to $7.9 billion. In mid August, the company reaffirmed its outlook for full-year 2007 earnings per share of about $3.15. DD has returned additional value to its shareholders through stock buybacks. During the second quarter, it repurchased 5.9 million shares of its stock for $300 million. The company expects to complete the remaining $1.1 billion of the share repurchase program by the end of 2007. On Jul 25, the Board of Directors declared a third-quarter common stock dividend of 37 cents per share. DD is currently yielding 3.0%.
5. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
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 stocks (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 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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