Friday - November 9, 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 - Sohu.com (SOHU)
Sohu.com (SOHU) is riding the wave of explosive Chinese internet growth to strong profits. Over the past two quarters, the company has averaged an 8% positive surprise. Earnings estimates are trending higher as well. During the past month, this year's estimates are a nickel higher at 78 cents per share. Analysts expect 69% growth next year. Four of the five analysts have raised their numbers over the past month for this year. Additionally, the most accurate estimate suggests 4% upside to the consensus estimate. Read the full analysis on SOHU now!
Goodrich Corporation (GR) announced a couple of recent contract wins and released third-quarter results in late October. The company reported an excellent quarter with double- digit sales growth. Earnings per share that increased on a year-over-year basis and beat the consensus estimate. GR included an increased full-year guidance in its quarterly report, and analysts have grown even more optimistic since the release of GR's quarterly numbers, bringing their year 2007 forecasts up to $3.75 per share. A couple of days before posting third-quarter results, Goodrich upped its quarterly dividend by 12.5% to 22.5 cents per share. GR is yielding 1.1% right now, which above the industry average. Its ROE is of 21%, versus the industry's average of 13%. Read the full analysis on GR now!
Mosaic (MOS) operates in the very hot industry of fertilizers, which is being fueled by a tightening supply coupled with increased demand. This has enabled MOS to significantly increase its revenue and capture better margins. Its stock price has more than tripled in the last year and looks well positioned for more growth. Read the full analysis on MOS now!
Gramercy Capital Corporation (GKK) is doing well despite the broader troubles in the real estate market. It just said that earnings grew almost 40% over last year, which easily beat analyst expectations. The company has exceeded estimates in four straight quarters by comfortable margins. The stock has unreal net margins of 50.7% and a huge dividend of 10.4%. Read the full analysis on GKK 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: Discounted Fundamental Strength
This Profit Track identifies stocks with strong underlying fundamentals and low valuations. These are companies with solid balance sheets and a history of profitability that are reasonably priced. Although conservative in approach, this strategy has generated double-digit returns for five consecutive years.
Here are four stocks that make the grade for the Discounted Fundamental Strength Profit Track:
Allstate (ALL) enjoys a price/earnings multiple of approximately 8.5 and a price/book multiple of 1.55; both of which suggests this property and casualty insurance company is a bargain. However, its Zacks Rank of 2 is what qualifies CB for the High Rank Value profit track, as earnings estimates for this year are up 3.8% and 1% in the past one-month and seven-day periods, respectively. While recently reporting strong third-quarter results, Chubb boosted its 2007 earnings per share guidance to between $6.05 and $6.15, thanks to solid results in the first nine months and an encouraging fourth- quarter outlook. Previously, the guidance was set at $5.70 to $6.10. All of the above-mentioned factors allude that Chubb is a true bargain with solid momentum for the future. Continue your research on ALL now!
DXP Enterprises, Inc. (DXPE) recently announced some solid third-quarter numbers, including earnings per share of 65 cents that eclipsed the consensus by approximately 12%. In the year-ago quarter, the company reported 52 cents. Sales jumped almost 57% to $106.8 million. In addition to these results, DXP Enterprises makes the grade for this profit track. The company sports a current ratio of 2.48, easily surpassing this screen's parameter of greater than 1.5. Furthermore, its debt/equity ratio of .09 is well below this profit track's qualification for less than .5. DXPE also has a PEG ratio of 0.77, an average five-year ROA of 7.8% and a P/S ratio of 0.92. Continue your research on DXPE now!
Skechers USA, Inc. (SKX) announced third-quarter earnings per share of 53 cents on net sales of $395 million. The earnings result beat the consensus by about 29% and bettered the year- ago performance. Net sales grew 19.3%. The company enjoyed growth across all channels of distribution. This Zacks #1 Rank company qualifies for this profit track with a current ratio of 4.61 and a debt/equity ratio of .03. (This profit track demands a current ratio that's greater than 1.5 and a debt/equity ratio that's less than .5. Also, its PEG ratio is 0.75, its price/sales ratio is 0.72 and its five-year average ROA is 5.6%. Continue your research on SKX now!
Terex Corporation (TEX) has a current ratio of 1.89, suggesting that this company is in a good position to fulfill short-term obligations. In addition, its debt/equity ratio stands at approximately 0.3, which means it has a good chance to prosper due to a low level of debt. In fact, this global manufacturer recently acquired Superior Highwall Miners for approximately $140 million payable in cash. Terex said the acquisition provides an important growth opportunity. This member of the Discounted Fundamental Strength profit track also has a PEG ratio of 0.59, a price/sales ratio of 0.84 and an average five-year ROA of 5.74%. Continue your research on TEX 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 shows how to find winning stocks in the hottest sector: More...
3. ZACKS EQUITY RESEARCH
For Zacks senior analyst Jon Kolb, earnings season covers a wide array of industries, from manufacturing to technology to energy, within the three main sectors under his coverage. We wanted to find out his viewpoint on how earnings season was progressing to this point.
Jon, you have a fairly wide range of stock coverage. How do you view the current earnings season?
As we near the end of the 3rd quarter 2007 calendar earnings season, I'd like to discuss the results we've seen so far in the aerospace, defense and utility industries. Among the companies to report so far within all these industries, the total market reported an approximately 4% decline in both net income and operating earnings, as compared to results for the 3rd quarter 2006.
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In comparison, each of the broad aerospace, defense and utility industries delivered significantly better results than the aggregate market. Utilities delivered the best year-over- year bottom-line results among this group, with a 45% year- over-year improvement in operating earnings and a 52% increase in net income. Electric utilities led the industry with operating earnings and net income growing 64% and 68%, year- over-year, respectively, distantly followed by natural gas distribution utilities reporting 2% and 2% growth, respectively, and multi-utilities reporting 10% declines for both bottom-line measures.
Likewise, the aerospace industry reported 36% year-over-year growth in both operating earnings and net income, modestly outperforming the defense industry at 32% and 27%, respectively.
Do you have any favorite specific companies within these industries?
Yes, we really like many of the aerospace & defense companies we follow, including this list of all Buy-rated stocks: General Dynamics (GD), L-3 Communications (LLL), Lockheed Martin (LMT), Northrop Grumman (NOC) and DRS Technologies (DRS). While DRS has yet to report quarterly results, each of the other names reported strong double-digit year-over-year growth in both net income and earnings per share. NOC led this group with 62% growth in net income and 64% growth in EPS.
Jon Kolb is a senior analyst covering the aerospace, defense and utilities industries for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include General Motors (GM), SK Telecom (SKM), Maguire Properties (MPG) and Patni Computer Services (PTI). To see their latest posts, click here.
Health Insurers: Good Guidance, but Mixed Cost Control
Median EPS Strong, Total Net Income Growth Terrible
4. INVESTMENT IDEAS
The editors at Zacks.com constantly analyze the universe of stocks to find the best investment ideas. Today, learn about a useful Research Wizard screen:
Let's be blunt. Now is not the time to be a hero in the stock market and put all your money in hot momentum stocks trying to find a bottom. That is a sure way to the poor house. Mr. Market will eat you up and spit you out as it has done to so many poor souls that thought they could be brave and get in front of a freight train.
But that doesn't mean you have to sell everything and hide. It just means you have to be smart and buy solid companies at reasonable valuations. These companies will not only hold up better when the market is taking a bath, they will outperform when things finally settle down as well.
I put together a screen using the Research Wizard with several parameters that I consider important. First of all, I consider Return on Equity (ROE) to be a very important indicator of management efficiency. So ROE has to be greater than 10. This is more than the median ROE of the average stock in the Zacks Universe.
I also wanted the stocks to have a Zacks Rank of 1 or 2, which would make them "Strong Buys" or "Buys" respectively.
Additionally, I want the brokerage community to be behind the stocks in this environment. Although sometimes a contrary indicator, in skittish times, consensus Strong Buys are comforting.
%(Broker) Rating Strong Buy=100(%)
Finally, the valuation should be low and that can be captured via a price/sales ratio of 1 or below.
PepsiAmericas (PAS) manufactures, distributes, and markets beverage products in the United States, central Europe, and the Caribbean. The company offers beverage products, and fountain syrup and equipment service under various brand names under licenses from PepsiCo, Inc. or PepsiCo joint ventures, as well as offers Toma brands in Central Europe.
This solid company has been delivering for shareholders in a big way of late. The stock sports a 12.6% ROE and is trading at 0.99x sales. This is despite the big run that the stock has already experienced. It seems that this one has much further to run.
Eastman Kodak (EK) engages the in development, manufacture, and marketing of digital and traditional imaging products, services, and solutions worldwide. The company's Consumer Digital Imaging group offers digital cameras, home imaging accessory products, home printers and printer media, and digital picture frames; and kiosks, digital imaging services, and imaging sensors.
This was a company that was left for dead not long ago. Earnings estimates have jumped over the past week for this year and next. The most accurate estimate shows considerable upside for next quarter and next year. Additionally, the stock has an ROE of 16.3%.
5. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
Let the Games Begin
Wall Street Digest
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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The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks' clients before the beginning of each month. The portfolios created monthly from 1988 through September 2006 exclude ADRS and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 - Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.
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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