Wednesday - October 17, 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 - WebMD Health Corporation (WBMD)
WebMD Health Corporation (WBMD) has a strong history of exceeding earnings estimates. It has done so in each of the past five quarters by a minimum surprise of 25%. Over the past 90 days, this year's estimates have increased seven cents to
58 cents per share. Analysts expect earnings to grow another 36.1% next year. The company sports a strong balance sheet with no debt. Read the analysis of WBMD now!
Growth & Income - Cummins, Inc. (CMI)
Cummins, Inc. (CMI) is a Zacks #1 Rank (Strong Buy) stock, which has been hitting 52-week highs lately and currently trades slightly below that level. The company recently declared a dividend of 25 cents per share. The dividend, which reflects a 39% year-over-year increase, is payable on November 30, 2007 to shareholders of record on November 16, 2007.
Cummins' current dividend yield 0.70% tops the industry's average of 0.40%. Last month, CMI reaffirmed its 2007 outlook of $7.15 to $7.65 per share, which is in line with analyst estimates. The release of third-quarter results is scheduled for October 25, 2007. Read the full analysis on CMI now!
Momentum - Invitrogen Corporation (IVGN)
Invitrogen Corporation (IVGN) is doing a good job of cloning profits. The company has exceeded analyst estimates by an average of about 25% over the past three quarters. This year's earnings estimates have risen 27 cents to $3.75 per share over the past 90 days. IVGN is also buying back shares at a nice pace. It recently authorized another $500 billion program after completing a previous one for the same amount. Read the analysis of IVGN now!
Value - The Chubb Corporation (CB)
Listen to the audio podcast on CB through Zacks' Audio Feature
The Chubb Corporation (CB) appears poised for another positive earnings surprise when it reports next Tuesday, Oct 23. Brokerage analysts have been raising their forecasts on multiple property and casualty insurers over the past several weeks, including Zacks #1 Rank stock CB. Read the full analysis on CB 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.
"Finding Growth Stocks at Excellent Values"
This week's screen has something for both Growth Investors and Value Investors.
Growth Investors focus on companies with great earnings growth, but that alone isn't good enough for many stock pickers. They want good growth at reasonable prices (low P/E's).
And while Value Investors focus on low P/E stocks, too many are low because they lack earnings power.
So instead, try combining the best of both worlds and focus on the companies with the highest growth rates and the lowest P/E ratios.
The screen I'm running this week is as follows:
This week (10/16/07), there are 14 companies that passed this screen. Here are three from that list that look great:
FTO Frontier Oil, Corp.
Incidentally, this screen backtested very well too. And while it wasn't designed to be a trading strategy per se' (15-20 stocks on average is a lot of stocks to trade every month for most investors), this screening strategy beat the market in every year for the last six years (2001 through 2006). (I ran a series of tests over the last six-year time span, using a four-week rebalancing period. Each run was rebalanced over a different set of four-week periods to eliminate coincidence and verify robustness.)
In 2001, this screen showed an average annualized gross return of 42.6%. In 2002, it was 19.1%. In 2003, it was a whopping 93%. In 2004, it came in at 40.4%. 2005 was up 11.9%. 2006 was 16.8%. And so far in 2007 (YTD through 8/31/07), its average compounded gross return is up 21.7%.
This screen is an excellent way to find good growth companies that also have low valuations.
Check it out for yourself and get the rest of the stocks on this list. See where your stocks Rank out of all of the other stocks out there, and test your own strategies and see how they've done. Find out what works and what doesn't. It can all be done with the Research Wizard stock picking and backtesting program. Sign up now for your two-week free trial and learn how.
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
Into the final quarter of 2007, but just before third quarter earnings results are released for the semiconductor industry, we wanted to get our senior equity analyst Ken Nagy, CFA's take on what he expects from this group now and through the remainder of the year.
Earlier this year, private equity buyouts were supposed to buoy semiconductor stocks. Obviously, the recent credit crunch seems to have dried this up a bit, but do you see buyouts continuing in the future?
Private Equity buyouts may slow down for a while, but the fundamental reason behind merger and acquisition activity is still there.
More. . .
First; there is a lot of cash on company's balance sheet and second; it is easier to buy new technology than develop it. Take the case of foundries (chip fabrication plants) as an example.
Capital outlays for bringing the most advanced fabrication plant on line has increased from $1 billion in 1997 to $2.75 billion in 2003, and is expected to accelerate to $6 billion by 2007. These increasing costs stem from higher price tags on the highly sophisticated production equipment that enable semiconductor manufacturers to produce state-of-the-art chips.
Is product demand impacting any particular semiconductor sub- sectors? If so, which types are performing the best right now? Any laggards?
The unit growth forecasted for Semiconductors earlier in the year are still solid. Average selling prices are a different story. Sharp declines in average selling prices (ASPs) for microchips in several key market segments (microprocessors, DRAMs, and NAND flash) - will contribute to slower growth in worldwide sales of semiconductors in 2007. The Semiconductor Industry Association (SIA) lowered its forecast for 2007 global microchip sales growth from 10 percent to 1.8 percent despite solid fundamentals and continued strong unit growth in major end markets. The new SIA forecast projects total sales of $252 billion in 2007, rising to $306 billion in 2010.
Now this turned around in August in as worldwide sales of semiconductors rose sharply in August, growing to $21.5 billion, an increase of 4.9 percent over August 2006, when sales were $20.5 billion, and an increase of 4.5 percent from July of this year when sales were $20.6 billion, (Data from the Semiconductor Industry Association (SIA)). Sales of NAND flash memory devices led the growth as supplies tightened and prices firmed. NAND flash sales were up by 48 percent compared to August 2006 and up by 19 percent from July of this year.
Have semis enjoyed price appreciation along with the rest of the market over the past eight weeks or so? Do you look for this to continue?
The SOXX, which is a semiconductor index, is up approximately 2.1% since the middle of August. Our position that semiconductor has switched to more of a consumer electronic story has not changed. This will lead to a seasonal bump in sales and inventory as manufacturers build for the holiday season. I look for continued strength in the now completed but not reported 3rd quarter and the 4th quarter.
Ken Nagy, CFA is a senior analyst covering the semiconductor industry for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include General Dynamics (GD), Charlotte Russe Holdings (CHIC), Aracruz Celulose S.A. (ARA) and ABN AMRO Holding N.V. (ABN). To see their latest posts, click here.
Listen to the audio podcast for the Earnings Preview through Zacks' NEW Audio Feature
More than three cuts for every two increases for both 2007 and 2008. More...
4. ZACKS WEALTH MANAGEMENT
Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Todayís topic is:
In an era where people are living longer, many find themselves in a situation where their insurance policy no longer serves its original purpose. Many people are still paying insurance premiums all the while dealing with a lack of funds to pay for retirement. In this situation, an investment to consider is the secondary market for life insurance policies. This should be considered as another source of capital in the right situation.
The first step is to determine if your current insurance policy no longer accomplishes its initial objectives. The typical candidate falls within the following situation:
You may also have determined that there is a greater need for these assets, previously used for your insurance policy, for long-term care or ordinary living expenses during retirement. Those that qualify can generally get more in the secondary market than they would receive by surrendering the contract for its cash value.
There is a significant difference between viatical settlements and life settlements. Viatical agreements pertain to terminally ill patients with life expectancies of no longer than two years. Life settlements pertain to life spans a little more than a decade. There must be a "negative shift in life expectancy" in which the policyholder is not expected to live as long as when the policy was first issued.
Keep in mind that this is a relatively new market which will only improve over time in terms of choices. Because this is an area regulated by state insurance departments, rules can vary somewhat from state to state.
There are, however, tax ramifications to this transaction. The premiums come back to the policyholder tax free as a return of capital. The difference between premiums paid and the cash value will be taxed as ordinary income. Any amount above the cash surrender value is treated as capital gain.
Again, this is an option to explore if you find yourself over insured and needing more assets for your retirement years. Feel free to contact me at 888-600-2783 x9251 if you have any questions or have a situation in which a life settlement may make some sense.
Fritz Fiebig can be contacted at firstname.lastname@example.org.
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:
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MackTheKnife (Rank #42 with $182,276)
HOW TO VALUE A STOCK IN 45 SECONDS (AOB)
Beris (Rank #60 with $170,847)
STATOILHYDRO LOOKS TO BREAK OUT TO $37 (STO)
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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.
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