Alliant Adds to SM-3 Missile Success – Analyst Blog
Aerospace and defense company Alliant Techsystems Inc’s (ATK) propulsion and control systems made a significant contribution to the success of the latest missile defense test of a Standard Missile 3 (SM-3) Block IA missile, conducted on April 15, 2011. The Missile Defense Agency exclaimed that the test was the toughest till date.
The SM-3 Block IA missile was launched from a U.S. Navy Aegis-equipped destroyer off the Hawaiian coast and successfully intercepted a separating intermediate-range ballistic missile (IRBM) target over the Pacific Ocean. This marked the 19th successful intercept performed by the SM-3 Blocks I and IA missiles.
Alliant Techsystems, a producer of rocket motors, is an integral member of the SM-3 team. Alliant supplies the Solid Divert and Attitude Control System (SDACS) to Raytheon Company (RTN), the prime contractor for the SM-3. The SDACS is a propulsion system that is used to guide the SM-3's kinetic warhead in its final intercept of a target.
Alliant produces the SDACS for the SM-3 program at its facility in Elkton, Maryland. Over the years, the company has produced more than 150 SDACS. Alliant also manufactures the Third Stage Rocket Motor (TSRM) for the SM-3 Block IA and IB missile.
Following the success of this challenging test, Alliant looks forward to continue working for the SM-3 program, hoping to see its years of design, development, and production expertise come to play.
Minneapolis, Minnesota-based Alliant Techsystems supplies aerospace and defense products to U.S. government agencies, and its prime contractors and sub-contractors. The company also supplies ammunition and related accessories to law enforcement agencies and commercial customers.
We retain our long-term Neutral recommendation on the stock, supported by a short-term Zacks #3 Rank (Hold).
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Positive Data for UCB’s Cimzia – Analyst Blog
UCB (UCBJF) recently reported positive data on Cimzia (certolizumab pegol) from a late-stage trial -- REALISTIC -- on patients suffering from rheumatoid arthritis (RA). The data were presented at the annual meeting of the European League Against Rheumatism (EULAR).
In the study, in which Cimzia was added to current therapy in a diverse group of RA patients, the ACR20 response rates were significantly higher in the Cimzia arm (51.1%) compared to placebo (25.9%) at week 12.
The study data also demonstrated that compared to placebo, the addition of Cimzia to the current therapy resulted in meaningful improvements in fatigue (56.4% versus 46.2%), sleep problems (49.7% versus 42.5%), pain (59.0% versus 42.0%) and patient-assessed disease activity (PtGA) (59.5% versus 42.5%) at week 12.
We note that Cimzia is currently marketed as a treatment for moderate-to-severe Crohn's disease (CD) in the US and Switzerland and RA in the US and European Union (EU).
UCB also announced its plans to initiate a study to evaluate the comparative effectiveness of Cimzia and Abbott Labs’ (ABT) Humira (adalimumab) in the treatment of moderate-to-severe RA. The 12-week study will enroll patients with moderate-to-severe RA who have either shown inadequate response to methotrexate (MTX) or who have not received anti-TNF treatment previously.
In the study, the patients will be randomized to Cimzia plus MTX or Humira plus MTX for 12 weeks. Thereafter, patients who respond will continue with the treatment over the long term (104 weeks), while non-responders will switch to the alternative treatment arm for 104 weeks.
Earlier in the month, UCB had reported positive data on Cimzia from post-hoc analyses of late-stage trials – RAPID 1 and RAPID 2.
RAPID 2 trial data demonstrated that at week 24, a larger number of patients in the Cimzia arm experienced improvements in all six Patient Related Outcomes (PROs) as compared to the placebo arm. Patients in both the 200 mg and 400 mg treatment groups experienced similar benefits with no significant difference.
The six PROs include pain, fatigue, patients’ global assessment of disease, physical function by HAQ, and HRQOL by SF-36 physical and mental component summary scores.
Results from the RAPID 1 trial demonstrated that at weeks 6 and 12 of treatment, rapid response rates were achieved among patients treated with Cimzia compared to those in the placebo arm.
We currently have a Zacks #3 Rank (short-term Hold rating) on UCB. We are pleased with the results of the REALISTIC study and view the comparative study between Cimzia and Humira as positive, given that Cimzia is one of the main revenue generators at UCB, and positive results from the comparative study will help boost the drug’s sales.
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Why Apple is a Flat-Out BUY Now – Voice of the People
Zacks highlights commentary from People and Picks Member «MightyMo».For more Voice of the People, visit http://at.zacks.com/?id=7872
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AAPL: Why Apple is a flat out BUY Recommendation NowThe fundamentalists will tell you Apple, Inc. (AAPL) is currently under-valued.
I see seven reasons why:
(1) CEO: The health status of Steve Jobs has put a deep cloud of uncertainty over the company.
(2) Cut in Index weighting: The S&P 500 slashed the weighting of it's index of Apple as it considered it to carry too much over-all weight in the index. Many passive funds were forced to sell their holdings on AAPL.
(3) Physical Price per Share: AAPL sells for over $300 per share. Although considered relatively cheap the physical price of the shares drives many retail investors away. A split in the share price will bring in more buyers. AAPL probably doesn't want to do this as a lower share price will cause more volatity in option plays. A lower price per share makes it's easier to perform complex option plays.
(4) Dividends. AAPL has a huge horde of cash but doesn't pay a dividend. Many players will not buy a stock that doesn't pay a dividend. AAPL could pay a 2-3% dividend without denting it cash horde.
(5) Japan: There is speculation that the Japan diasters this year have slowed down production of elements needed for AAPL products, There is no factual information that this actually is happening however, no guidance from Apple to this regard.
(6) Seasonality: APPL in the last five years has seen it's share price drop in May from 1st quarter and bottom in June. However it tends to climb from that point on into the 4th quarter.
(7) Tech Sector: The overall tech sector, as indicated by the Nasdaq index and MSX tech index has been relatively weak this year carrying AAPL with it.
As you can see, now of the above relate to fundamental reasons. Apple's story; growth prospects, products, cash flow and valuations have been stated many times. I do not need to rehash them here. AAPL has a low P/E of 16 for a tech stock although its growth prospects (double-digit growth, earnings, and revenue rates) continue to be huge.
On Nov 17, 2010 we listed our top ten super growth stocks which included AAPL then at a recommended buy at 300. It has moved up only 35 points. Based on analysts' projections there is plenty of more room for AAPL.
Analysts projections of AAPL include the following:
Price targets: $500 at Credit Suisse, $440 at S&P; Wedbush is at $450, Oppenheimer at 450, UBS at 495 and Ticondergora at 612.
In my opinion, given the current undervalued price of AAPL, this is a great time to continue to hold AAPL or buy in. We liked APPL at 300 and we like it even better at current levels.
Updated item May 31, APPLE to announce icloud !
The most recent picks by «MightyMo» are:
A buy rating on Apple, Inc. (AAPL),
a buy rating on Chipotle Mexican Grill (CMG) and
a buy rating on NetFlix (NFLX).
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American Tower Reverts to Neutral – Analyst Blog
We upgrade our recommendation for American Tower Corp. (AMT) to Neutral backed by its solid first-quarter 2011 financial results. The company’s top line witnessed significant upside primarily due to the rise in demand for broadband data services coupled with American Tower’s global expansion strategy.
American Tower continues its strong performance driven by substantial demand for tower space to facilitate high-speed wireless data and on demand video services, together with super-fast 3G/4G technologies. Verizon Wireless already started deploying LTE from end 2010.
AT&T will follow suit from mid-2011. Furthermore, wholesale 4G operators like Clearwire Corp. (CLWR) and LightSquared venture have become major growth area for wireless tower companies.
We believemassive demand for wireless data and video in the developed markets coupled with diversification into several emerging markets will boost the company’s long-term growth. Rental & Management revenue, adjusted EBITDA, and free cash flow remain favorable.
In a major development, on May 19, 2011, the board of directors of American Tower has approved the commencement of the steps necessary to reorganize the company for qualifying as a real estate investment trust (REIT) for tax purposes. However, the conversion will not take place before January 1, 2011.
AmericanTower is quickly expanding its business operations in various emerging markets. In addition to Brazil and Mexico, American Tower has taken a major initiative to expand its operations in India. This will generate long-run sustainable business for the company. Furthermore, the company is also expanding the Latin American markets of Chile, Peru, and Colombia. Recently, American Tower has entered into the South African market.
However, the proposed acquisition of T-Mobile USA by AT&T (T) may become a long-run negative for American Tower. T-Mobile currently accounts for around 8% of American Tower’s consolidated revenue. At present, these two companies simultaneously shares 3,100 sites of American Tower.
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American Tower Revert to Neutral – Analyst Blog
We upgrade our recommendation for American Tower Corp. (AMT) to Neutral backed by its solid first-quarter 2011 financial results. The company’s top line witnessed significant upside primarily due to the rise in demand for broadband data services coupled with American Tower’s global expansion strategy.
American Tower continues its strong performance driven by substantial demand for tower space to facilitate high-speed wireless data and on demand video services, together with super-fast 3G/4G technologies. Verizon Wireless already started deploying LTE from end 2010.
AT&T will follow suit from mid-2011. Furthermore, wholesale 4G operators like Clearwire Corp. (CLWR) and LightSquared venture have become major growth area for wireless tower companies.
We believemassive demand for wireless data and video in the developed markets coupled with diversification into several emerging markets will boost the company’s long-term growth. Rental & Management revenue, adjusted EBITDA, and free cash flow remain favorable.
In a major development, on May 19, 2011, the board of directors of American Tower has approved the commencement of the steps necessary to reorganize the company for qualifying as a real estate investment trust (REIT) for tax purposes. However, the conversion will not take place before January 1, 2011.
AmericanTower is quickly expanding its business operations in various emerging markets. In addition to Brazil and Mexico, American Tower has taken a major initiative to expand its operations in India. This will generate long-run sustainable business for the company. Furthermore, the company is also expanding the Latin American markets of Chile, Peru, and Colombia. Recently, American Tower has entered into the South African market.
However, the proposed acquisition of T-Mobile USA by AT&T (T) may become a long-run negative for American Tower. T-Mobile currently accounts for around 8% of American Tower’s consolidated revenue. At present, these two companies simultaneously shares 3,100 sites of American Tower.
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Look to Dividends for Income – Analyst Blog
With the 10-year T-note yielding only 3.06%, those investors interested in getting income from their investments are in sort of a tough place. Dividend-paying stocks are a very good place to look for a replacement.One thing you know for sure is that the coupon payment on a 10-year note is not going to rise. A yield of 3.06% does not offer much of a cushion against inflation.
What is inflation likely to average over the next 10 years? I have no idea, but based on the spread between the regular 10-year note, and the 10-year TIPS, the market is implicitly expecting a rate of about 2.50%, which is pretty much in line with the historical experience (Headline CPI) over the last 20 years of 2.57%.
While core inflation is the thing to keep an eye on when judging if monetary policy is too tight or too easy, it is headline inflation that investors, particularly fixed-income investors, have to be concerned about. After all, the whole point of buying a bond is to defer consumption of a basket of goods and services from today in order to be able to consume a bigger basket of goods and services in the future. Both of those baskets are going to contain food and energy. An expected real return of 0.56% is not a very big payoff for that long a period of delayed gratification.
Inflation Not a Huge Threat
I do not think that inflation is currently a huge threat. I agree with Fed Chair Ben Bernanke that the recent commodity price spike fueled increase in headline CPI is likely to be short-lived. On the other hand, it seems quite plausible to me that we could see much higher inflation a year or two from now, particularly if the economy manages to get back on track and unemployment falls to more normal levels.
I’m not talking about a trip to Zimbabwe, or even a return to the 1970’s, but inflation rising to around 4% would not shock me. Given the huge indebtedness of the consumer sector, and increasingly the government sector, it would not be the worst thing in the world, either -- it could actually be a good thing (although here is a case where one can easily have too much of a good thing).
If that proves to be the case, then your real return on the T-note will be negative. The yield will rise, and the price of the bond will fall. You are simply not being paid very much for taking that risk.
Debt Ceiling to Increase...?
Of course, if we don’t increase the debt ceiling -- and it looks like there is a real possibility that the Government could even be a few days late in making an interest payment -- the rise in T-note yields could happen much sooner than that. I expect that the increase in the debt ceiling will happen, but that it will probably fail at least once before it happens.
That could make the markets very nervous. Not raising it would be the absolute height of fiscal irresponsibility and incompetence in Congress, but before it gets raised there might be a lot of interesting political theater. If you want to directly play a rise in T-note yields, short treasury ETF like TBT are a good call. Most investors though will probably just want to find potential shelter from the storm. A basket of high-yielding stocks is a very good safe harbor.
It is, however, a mistake to only look at the dividend. Buying a stock because it yields 4.0% and seeing the stock fall by 5.0% right after you buy it is not going to make you either happy or wealthy.
How to Find the Best Dividend-Yielding Stocks
You want to find both a good steady income, and some potential for near-term appreciation. Therefore, I looked for stocks that are currently rated either #1 (Strong Buy) or #2 (Buy) based on the Zacks Rank.
It just so happened that all that passed the other requirements were “#2s.” Dividend investing is a long-term strategy, and the Zacks Rank is mostly for shorter-term traders, but even long-term investors should not ignore it entirely. It is still a good timing tool for them.
If you are buying a stock for income, the last thing you want to see is a cut in the dividend. The best defense against that is a low payout ratio. Managements generally will try to avoid dividend cuts, but paying out more than you earn each year is not sustainable. A company needs to retain at least some of its earnings to grow, not just earnings, but the dividend as well. I therefore required that the company pay out no more than 60% of its earnings so there is a very strong cushion against dividend cuts.
One of the nice things about dividends is that they tend to grow, particularly if the company has a history of raising dividends. It is that dividend growth that can protect you from inflation. That is something that a T-note simply will not do for you.
In the screen I required that dividends increase by an average rate of 5% per year over the last five years. In other words, the dividends have increased by more than the rate of inflation over that period. More significantly, the first cut is the hardest. The five percent growth requirement has the added advantage of eliminating any firm that has cut its dividend in recent years
With a dividend plus dividend growth strategy, it is imperative to avoid dividend cuts. I would not expect some of the historic growth rates to be continued. It is highly unlikely that Rogers Communications (RCI) is going to generate the sort of earnings growth needed to grow its dividend at over 78% per year over the next five years. Most, however, have dividend growth rates in the mid-teens or lower, and those sorts of growth rates are probably sustainable, at least for a few more years.
Don’t be afraid to look outside the U.S. for income stocks. The dollar has been declining, and I think it will probably continue to do so. That would mean that a dividend paid in Euros or Yen would be translated into even more dollars.
Some of these firms, such as Alliance Resources (ARLP) are structured as limited partnerships. That will require a bit more paperwork at tax time (unless, of course, you put them in a tax advantaged portfolio such as a 401-K), but often a big part of those dividends are a return of capital and that portion is generally tax free.
Also, while dividend paying firms are generally larger market-cap firms, that is not always the case, as this screen shows. Yes, there are huge firms on the list like Phillip Morris (PM) and Sanofi-Aventis ((SNY), but there are also three sub-$500 million micro-caps as well.
Historically, dividend-paying companies have far outperformed non-dividend paying stocks, and dividends account for about 40% of the total return from owning S&P 500 stocks over the long term. The combination of high dividends plus short-term estimate momentum just could lead to long-term success in the market.
This is not a flashy strategy, but a solidly profitable one. It focuses on both sides of total return -- income plus capital appreciation.
| Company | Ticker | Div. Yield | Div Yield 5 Yr Avg | Payout Ratio | Div. 5-Yr Growth | Zacks Rank | Market Cap ($ mil) |
| Bce Inc | BCE | 4.93% | 4.53% | 0.67 | 8.73% | 2 | $30,062 |
| Alliance Res | ARLP | 4.89% | 6.55% | 0.48 | 13.87% | 2 | $2,675 |
| Gas Natural Inc | EGAS | 4.75% | 4.84% | 0.61 | 16.36% | 2 | $89 |
| Alliance Hldgs | AHGP | 4.68% | 5.38% | 0.68 | 23.36% | 2 | $2,840 |
| Avista Corp | AVA | 4.50% | 3.65% | 0.59 | 16.16% | 2 | $1,401 |
| Telus Corp | TU | 4.02% | 4.23% | 0.61 | 13.51% | 2 | $7,769 |
| Natl Bnkshrs Va | NKSH | 3.83% | 3.59% | 0.41 | 5.64% | 2 | $174 |
| Rogers Comm Clb | RCI | 3.74% | 2.32% | 0.47 | 78.23% | 2 | $16,717 |
| Philip Morris | PM | 3.63% | 4.38% | 0.64 | 10.17% | 2 | $126,734 |
| Rpm Intl Inc | RPM | 3.60% | 4.09% | 0.6 | 5.63% | 2 | $3,046 |
| Sanofi-Aventis | SNY | 3.53% | 2.96% | 0.25 | 7.06% | 2 | $101,419 |
| Tompkins Fin Cp | TMP | 3.53% | 3.09% | 0.43 | 5.56% | 2 | $421 |
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Wisconsin Energy Still at Neutral – Analyst Blog
We reiterate our long term Neutral recommendation on Wisconsin Energy Corporation (WEC) on the back of mixed first quarter performance together with a solid growth outlook.
Milwaukee-based Wisconsin Energy operates a high-growth utility in a constructive regulatory environment. The company has a strong and highly-visible near-term growth outlook and a solid financial position, which does not require new equity in the foreseeable future. Moreover, we expect the customers of the company to reap greater benefits through its “Power the Future” investments.
In first quarter 2011, Wisconsin Energy posted operating earnings of $0.72 per share, significantly beating the Zacks Consensus Estimate of $0.66 and the year-ago quarter's operating earnings of $0.55. Total revenue of $1.33 billion in quarter showed a growth of 6.4% from the year-ago comparable period but fell short of the Zacks Consensus Estimate of $1.37 billion.
Though the revenue numbers missed estimates in the first quarter, Wisconsin Energy has been consistently outperforming earnings estimates for the past four quarters. We believe the company’s consistent earnings performance and strong guidance point to a gradual improvement across all segments and management’s confidence in its operations.
This coupled with the Wisconsin Energy’s new dividend policy, which targets dividend payout ratio of about 60% of earnings between 2012 and 2015 should attract investors going forward, in our view.
However, Wisconsin Energy is subject to significant state, local and federal government regulation, which may impose restrictions on the company’s operations and give way to substantial increase in compliance costs which may impact the company’s bottom line.
Also, the successful implementation of WEC’s business strategies depends largely on its ability to access the capital markets (including the banking and commercial paper markets) under competitive terms and rates. Failure to access any of these markets would significantly increase the company’s cost of capital.
In all, we believe Wisconsin Energy is well positioned to benefit from its strong and highly-visible near-term growth outlook, together with its solid financial position, which does not need new equity in the foreseeable future.
However, driven by soft retail electricity demand and uncertainty over regulation, we believe continued weak sales will weigh on earnings in the near term. This keeps us on the sidelines.
Wisconsin Energy currently retains a Zacks #3 Rank (short-term Hold rating). Based on short term ratings, the company fares better than its peers Integrys Energy Group Inc. (TEG) and Xcel Energy Inc. (XEL), who carry a Zacks #4 Rank (short-term Sell rating).
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Accenture Wins Banking Deal – Analyst Blog
Accenture plc (ACN) recently entered into an agreement with a subsidiary of Credit Agricole Group, one of the largest European retail banking conglomerates. The Group selected Accenture’s services for CEDICAM, its payment flow and systems subsidiary. Financial terms of the deal were not disclosed.
Under the terms of the agreement, Accenture will develop an information technology (IT) platform for CEDICAM. The advanced IT platform will ensure an easier and smoother collection process of European payments as per the requirements of the European Commission and the French regulator.
Accenture’s solution will enable CEDICAM to launch a new payment processing platform for its clients. The platform will make electronic payment (card payments, credit transfers, direct debits and cross-border processing) simpler and flexible for Europeans.
Accenture shares a good business relationship with the Credit Agricole Group. The Group has been leveraging support from Accenture since 2007 and has modernized its payment operations and systems. Accenture’s proven expertise in developing payment processing systems prompted the Group to deploy its services. We believe that success at CEDICAM could attract more deals from the financial services vertical.
Accenture has been successful across various industrial sectors as well as geographical regions. Recently, the company announced that it will collaborate with Anheuser-Busch InBev (BUD) on a digital merchandising service intended to help the brewer’s point-of-sale activities.
It also won a five-year consulting and outsourcing services contract from CEVA Logistics and a two-year information technology services contract from Israel Electric Corporation. Moreover, Accenture’s core banking solution has been deployed by Banco Bilbao Vizcaya Argentaria S.A.’s (BBVA) U.S. banking subsidiary.
Apart from this, Accenture has also gained a strong foothold in the insurance vertical.
We are encouraged by the healthy growth in revenue and bookings in Accenture’s recently concluded third quarter of 2011. However, the economic turmoil in Europe and competitive pressure from IBM Inc. (IBM) could considerably rationalize Accenture’s growth prospects.
Accenture has a Zacks #3 Rank, implying a short-term Hold recommendation.
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Meet Kevin Cook – Analyst Blog
Hello fellow investors! My name is Kevin Cook and I just joined the Zacks.com team as a Senior Stock Strategist. I can't wait to share with you all the ways we can work together to not simply survive in this market, but to thrive in it!
But, first things first...I want you to know a few things about my background and lessons learned over the years that prepared me to become a huge fan of the Zacks Rank stock rating system and related trading methods. Then we'll top it off with my current view of the market along with some strategies and picks to outperform. Let’s go.
FX Training Ground to Equities Laboratory
I was an institutional currency trader for over nine years, trading $100 million per day in the hyper-kinetic world of spot-futures arbitrage. As a dedicated electronic market-maker providing continuous liquidity to the biggest banks and hedge funds in the world, I was part of the groundbreaking team at CME Group (CME) that turned FX Futures into the fastest growing segment of the $4 trillion-a-day forex market.
This "constant combat" role amidst the titans of the FX interbank market taught me a lot about risk management, position sizing, global economics and technical trading tactics. This was high-frequency trading before the computers took over -- one man or woman, with firepower and capital at the fingertips, using fast reflexes to buy yen or sterling or marks at one price in London or Toronto and sell them higher (or at a scratch, if we were lucky) in New York or Frankfurt.
But soon enough, we realized that a computer could do the arbitrage of 100 traders on keyboards. And I got the chance to help build, test and operate the first automated FX arbitrage algorithms early in the last decade. Essentially, I helped innovate myself out of a job, but it was time to move on anyway and I found one of the coolest opportunities in markets.
I went to PEAK6, the powerhouse equity options trading house in Chicago, and helped build an online options education community for their broker OptionsHouse.
I spent two years refining my options knowledge around some of the best pros in the business and became a market analyst representing PEAK6 on CNBC, Bloomberg and FOX Business, providing commentary on equities, commodities, currencies and options strategies.
I knew I had an extraordinary opportunity to advise investors at the recession lows of 2009 to buy long-term positions in cyclicals, technology and biotech, recommending Caterpillar (CAT) at $40, "buying all the dips" in Apple (AAPL), and backing up the truck on the iShares NASDAQ Biotechnology Index ETF (IBB) at $65 and "putting it away."
After the PEAK6 media experiment finished up in 2010, I joined TheStreet.com as an options strategist for one of their newsletters. This was another great experience where I was able to take my new equity research skills and apply them to making specific trading recommendations every day for hundreds of subscribers.
I had some great trades in that eight months, with triple-digit winners in names like Ford (F), Suncor (SU), Chesapeake (CHK), Eaton (ETN), Marathon (MRO), Veeco Instruments (VECO), Sandisk (SNDK), Apple and Google (GOOG).
A Powerfully Predictive Indicator
I also had nice success in the past two years with other stocks that fit my criteria for momentum, growth or value -- combined with institutional sponsorship. But, I also had some wipeouts.
And I realized the one thing I had desperately been in search of since I started investing for myself (at least 15 years) was a core method and set of tools for screening the universe of equities and picking the highest probability winners based on this ethereal metric I heard equity fund managers call "earnings momentum."
Because even if I was right about the macro forces driving a sector, industry, or stock like Freeport McMoRan (FCX), ETN, or VECO, my big-picture ideas would fall flat if I got the earnings picture wrong. But I wasn't a trained equity analyst or finance graduate, so I knew I would never figure out a reliable and robust method on my own. It seemed I was doomed to the randomness of my own ADHD-scanning of markets, hoping to identify the winners amidst the noise.
Then this spring I found what I was looking for and all the lights went on. The Zacks Ranks stock rating system changed the game for me because now I had a proven fundamental model to screen thousands of stocks instantly every day based on the most reliable fundamental metric: earnings estimate revisions.
If you are already a Zacks Rank convert, I don’t need to explain any further. If you aren’t, then I want to direct you to the Education pages on the site for a breakdown of the philosophy, its mechanics and practical uses.
I am such a huge fan for this reason: the rigorously quantitative and objective model is actually predictive of stock prices because it has such a high probability of telling you what the big money is going to do weeks before they do it.
Second-Half Outlook and Ideas to Profit
So where are we now after this terrific bull run off the recession lows? My amateur-economist take is that we are still in the middle innings of this recovery which will extend into 2013. Emerging markets are still driving global growth and despite the extraordinarily accommodative monetary stance of the Fed, inflation is not of a run-away variety -- yet.
As we enter the summer months, I think the market will drift sideways to lower as the path of least resistance when catalysts are fairly balanced. When it's done resting, I believe we'll see the S&P 500 at the 1,500 level by this time next year.
Markets have shaken off and priced-in most bad news, but investors have also erred on the side of pricing in a good chunk of the good news, too, like record corporate profits and tons of cash still on the sidelines. Wild cards are housing weakness which may spur further Fed QE programs, and the US debt crisis which may start to mirror the European one.
In all cases, we could be in for some good volatility and selling as investors protect profits during this seasonally weak time of the year. In a bull market, most selling-related volatility is "good" and spells buying opportunities.
My favorite strategy will be to wait for a fear-driven sell-off, where volatility surges, to sell puts on my favorite names for the rest of the year. I want to accumulate positions in energy names like Suncor and Occidental Petroleum (OXY), materials names like FCX and Alcoa (AA), and industrials like CAT and ETN. The opportunity may occur this summer, or it may wait for a classic autumn meltdown.
In either case, the S&P should find support above 1,200 and bargains will be found on high-quality stocks with strong positive earnings outlooks. So keep an eye on the Zacks Rank for these names, especially as we head into Q2 earnings season.
Other than sovereign debt dramas, the really interesting fireworks will come after the Fourth of July when company numbers once again reveal the true nature of the investing landscape.
Kevin Cook is a Senior Stock Strategist for Zacks.com
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Philip Morris’ Smoking Option – Analyst Blog
Philip Morris (PM) bought the patent and global rights to an aerosol nicotine-delivery system developed by Jed Rose, director of Duke’s Center for Nicotine and Smoking Cessation Research. The new technology delivers nicotine to users' lungs but doesn't involve smoking.
Management reported that the Center for Nicotine and Smoking Cessation Research at Duke University in Durham, N.C. where Jed Rose is working, does not have a role in Rose's agreement with the company and won't receive any money. Terms were not disclosed.
This technology will help the smokers to get the nicotine straight from the cigarette without generating the accompanied smoke and the toxic substances. This endeavor resonates the company’s effort to reduce death and disease associated with smoking.
Switzerland based Philip Morris will next develop a commercial product using the technology. The system differs from current medicinal nicotine inhalers available on the market as aids to stop smoking because it delivers nicotine more rapidly to hit the smokers just like a cigarette.
However, management has reported that it may take three to five years for the company to develop the commercial product.
Tobacco companies have been taking steps to venture into smokeless tobacco and other nicotine products as tax increases, health concerns, smoking bans and stigma cut into demand for cigarettes.
Last month, British American Tobacco Plc created a subsidiary called Nicoventures focused on nicotine alternatives. In 2009, Reynolds American Inc. (RAI) purchased Swedish company Niconovum whose nicotine gum, pouches and spray help people give up smoking.
We are encouraged as Philip Morris is strengthening its brand portfolio through innovation based on enhanced consumer understanding. Marlboro’s brand equity is being supported by the introduction of innovative packaging, new blends, and other line extensions, along with fresh execution of its iconic image. Similarly, the L&M brand is being revitalized with the introduction of products having a smoother taste and more attractive pack designs.
We currently have a Zacks #2 Rank on Philip Morris shares, which translates into a short-term Buy rating.
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