Friday - November 30, 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 - Apple Inc. (AAPL)
Apple Inc. (AAPL) is on a roll and shows no signs of slowing down. To say the company has been doing well is an understatement. Everybody knows that iPods and iPhones are selling like hotcakes, but the company's Macs are flying off the shelves as well. Over the past 60 days, this year's earnings estimates have jumped 56 cents to $4.95 per share. Analysts expect earnings to jump another 26.6% next year. Read the full analysis on AAPL now!
Williams Partners L.P. (WPZ) posted third-quarter earnings of 62 cents per share in early November. The result eclipsed the previous year's 58 cents and exceeded the consensus estimate by a penny. After the close of the third quarter, the company increased the quarterly cash distribution payable to unitholders to 55 cents from 52.5 cents, noting that this was the seventh consecutive quarterly cash distribution increase. WPZ offers a healthy ROE of 82%, dwarfing the industry average of 14%. Read the full analysis on WPZ now!
Nokia Corporation's (NOK) stock has had a very nice three- month run, with prices accelerating from below $27 to over $40 per share. The company recently reported another great quarter that easily outpaced analyst projections, marking the fourth consecutive quarter that the company has surprised and beaten estimates. Read the full analysis on NOK now!
Lear Corporation (LEA) is cost-cutting its way to huge profitability. The weak dollar has also given a big boost to its international business. LEA is a cheap stock with rising earnings estimates. This is a bullish combination, which could produce strong returns. The stock is trading at only 7.2x estimates, well below the industry average of 23x. Read the full analysis on LEA 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: Earnings and Margins
This Profit Track goes to the heart of fundamental investing by finding companies with healthy earnings. The main ingredients are the search for Earnings Growth and Net Profit Margins. Then for good measure we make sure earnings estimates are moving higher which is a strong indicator of future performance and that brokerage firms are positively rating the stock.
Here are four stocks that make the grade for the Earnings and Margins Profit Track:
AMERISAFE, Inc. (AMSF) is no stranger to the Earnings and Margins profit track. The specialty writer of high hazard workers' compensation insurance has been featured before, most recently in September. It's easy to see why given its 248% earnings surge for its most recently-competed quarter and its net margin of 11%. Along with a favorable Zacks #2 Rank, AMERISAFE appears to be a solidly-fundamental company with healthy earnings. Earlier this month, the company announced third-quarter earnings per share of 58 cents, eclipsing the consensus by approximately 23% and easily surpassing the year- ago performance. Continue your research on AMSF now!
The Middleby Corporation (MIDD) grew earnings per share by almost 29% in its most recently-completed quarter, compared to the prior year. In addition, its net margin is at 11%. These two factors, along with its Zacks #2 Rank, puts the foodservice equipment company on the Earnings and Margins profit track. Middleby, which recently agreed to buy New Star Holdings Int'l for $188 million, reported an earnings per share surprise of more than 10% for its third quarter. Furthermore, acquisitions helped sales to rise by 32% year over year. Continue your research on MIDD now!
PLX Technology, Inc. (PLXT) is the leading supplier of PCI Express and other standard I/O interconnect semiconductors. In its most recently-completed quarter, the company's earnings grew 400%. In addition, net margin is 4% and PLXT is a Zacks #1 Rank. Given such factors, the company is a member of the Earnings and Margins profit track. In October, PLX Technology announced revenue that moved slightly higher year over year on earnings per share that beat the consensus. The company stated that it continued to improve its financial results and its leadership position in the PCI Express market. Continue your research on PLXT now!
Parkvale Financial Corporation (PVSA), which is the parent of Parkvale Bank, earned 65 cents per share in its fiscal first quarter, which was reported in October. That result topped the consensus by more than 4.8% and also improved from the year- ago performance. In its most recently-completed year, this Zacks #2 Rank reported a 43% growth in its earnings per share. Also, its net margin is at 12%. These two results easily surpass the parameters for this profit track, and suggest that Parkvale Financial is a fundamentally strong company with good earnings potential. Continue your research on PVSA 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.
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Kevin Matras looks at the short ratio as a market sentiment indicator and shows how to use it for finding winning stocks: More...
3. ZACKS EQUITY RESEARCH
As expected, we are not hearing many encouraging words about the housing market going into 2008 from Zacks senior homebuilding industry analyst Mario Ricchio. But he was able to help fill out our perspective on what we should be looking out for.
Where do you think we are right now in the housing cycle?
We believe the housing market is at the mid-point of the down- cycle. The next shoe looks ready to drop starting in early 2008. The sub-prime market concerns started the general unrest in the credit markets a little over three months ago. We see these credit concerns increasing in the future.
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Between January 2008 and June 2008, some estimates put the dollar amount of ARMs resets at a total of $521 billion, which exceeds the total dollar amount of ARMs resets for all of 2007. So if investors think the worst of the sub-prime difficulties have passed, they are in for a rude awakening.
As we head into 2008, the default rate on sub-prime loans should increase with homeowners struggling to refinance at a lower rate, with certain selling prices falling well below the outstanding mortgage balance, and with an increased probability of a higher unemployment rate.
We believe up to one million homeowners are at risk of losing their homes in the next few years. With over two million vacant homes already on the market and foreclosures on the rise, the housing market is years away from a recovery.
Have you had to change any of your models for fiscal year 2007 or 2008?
Yes, we lowered our FY08 forecast for single-family housing sales down to 750,000 units from 850,000 units. The credit market turmoil has effectively shut the credit spigot for sub- prime loans and tightened the spigot on ALT-A and prime loans.
Essentially, the credit conditions have changed for the worse.
It is much harder for a homeowner to get a loan, especially if it is a non-conforming loan. Mortgages below $417,000 are conforming loans because they conform to the maximum loan amounts that may be purchased and guaranteed by Fannie Mae(FNM) and Freddie Mac (FRE). Since Fannie and Freddie cannot purchase jumbo loans, mortgage lenders perceive higher risk and demand higher rates on these loans. The problems in the jumbo loan market have serious negative repercussions for markets such as Washington D.C, California, Florida and New York, where home prices are typically higher than in the rest of country.
The higher interest rate is just one impediment for the prospective homebuyer; the other concern lies in the down payment. In many cases throughout the country, we have heard mortgage lenders are requiring anywhere between a 10-20% down payment. This reinforces our view that the marginal borrower is effectively shut out of the housing market, which has a negative impact for housing demand. As a result of the new credit conditions in the mortgage market, we expect new homes sales to disappoint for the foreseeable future.
Mario Ricchio is a senior analyst covering the homebuilding and construction industries for Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include NDS Group (NNDS), Dr. Reddy's Labs (RDY), Fred's (FRED) and Millicom Int'l (MICC). To see their latest posts, click here.
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:
From reading the recent financial headlines, it wouldn't be crazy to think that the dollar is experiencing a crash. Everyday, it seems that the dollar falls to a record low against the Euro. Even the Canadian "Loonie" has pulled even (and briefly ahead) of the dollar in value.
If the dollar isn't experiencing a "crash", which is difficult to define, than it is certainly going through turbulent times to say the least. According to experts, there are still too many dollars floating around the world, which means the greenback still has downside left. It doesn't help that the Fed is in the process of cutting rates and that our economic growth rates have fallen behind Europe and emerging markets.
OPEC has even tossed around the idea of pricing oil in Euros.
So what should an investor do? Add gold to your portfolio.Over time, gold has proven to be a stable store of value when times get rocky, the dollar drops, and inflation soars. Many investors don't have any exposure to the metal, which could be a mistake. At least a certain portion of your assets should be allocated to gold since it has a low correlation to most other financial assets.
The next best thing to buying the metal is investing in gold stocks. Here are a few gold stocks worth considering:
Newmont Mining (NEM) engages in the exploration, acquisition, and production of gold properties in the United States, Australia, Peru, Indonesia, Ghana, Canada, Bolivia, New Zealand, and Mexico.
The stock is currently a Zacks #2 Rank (Buy), and has been performing well of late. It was a $40 stock as recently as August, and is consolidating those gains. This is the "blue chip" gold stock of the group and should continue to perform well. Over the past month, this year's earnings estimates have increased 17 cents to $1.05 per share.
Royal Gold (RGLD), together with its subsidiaries, engages in the acquisition and management of precious metals royalties. It has royalty interest primarily in Pipeline Mining Complex, which is located approximately 60 air miles southwest of Elko, Nevada, in Lander County.
RGLD is a Zacks #1 Rank (Strong Buy) stock. Over the past 60 days, this year's earnings estimates have risen eight cents to $1.02 per share. Both covering analysts have raised their estimates over the past month. The stock has an incredible net margin of 41%.
5. FEATURED EXPERTS
Here we cast the spotlight on timely Featured Expert commentaries that recently appeared on Zacks.com.
Another Inconvenient Truth
Market Myth Busters
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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