Saturday, October 14, 2006
Volume 7, Issue 13

In This Issue:

1) Current Market Metrics - Mutual Fund Flows
2) Recent Blog Research Features
3) Viewing the Market
    A) Danger Ahead
    B) Where to Now?
4) Feature Stock #1 - IndyMac Bancorp (NDE)
5) Feature Stock #2 - Swift Energy (SFY)
6) Additional Stocks - Worth a Further Look
    A) Knightsbridge Tankers Limited (VLCCF)
    B) The Procter & Gamble Company (PG)
7) About VitalStocks.com
8) DISCLAIMER:  Use of this newsletter signifies your acceptance of this disclaimer.

 RSS Feed available: Fresh content each weekday http://feeds.feedburner.com/VitalstocksInvestingNewsletterDigest

This issue sponsored by...
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1) Current Market Metrics:

- SAN FRANCISCO (MarketWatch) -- Investors added an estimated $1.4 billion to stock mutual-funds in the five trading days through Wednesday, reversing outflow of $653 million in the previous week, data firm TrimTabs Investment Research said late Thursday. U.S. stock funds saw inflow of $761 million, vs. $895 million in withdrawals a week earlier.

Source: http://www.marketwatch.com

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Independent Data on Fund Flows
Data As Of: 11 Oct 2006

- Including ETF activity, Equity funds report net cash inflows totaling $5.868 billion in the week ended 10/11/06 with Domestic funds reporting net inflows of $4.947 billion and Non-domestic funds reporting net inflows of $922 million;

- Money Market funds report net cash inflows totaling $17.032 billion;

Source (Much more information available): http://www.amgdata.com/

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Visit our blog and share an article with a friend.

2) Recent Research Articles - Actionable investment research and commentary, unedited, straight from the pros.

2A)   (INFY) - Over the past 90 days, five analysts upped their earnings estimates for both this quarter and next quarter:

http://vitalstocks.com/blog/2006/10/infy-over-past-90-days-five-analysts.html

2B)  (SPIL) - beat analysts' earnings expectations for five straight quarters by an average margin of 23.9%:

http://vitalstocks.com/blog/2006/10/spil-beat-analysts-earnings.html

2C)   David Fried, Buyback Premium Portfolio - Siderurgica (SID) - Holly Corporation (HOC) - BJ Services Company (BJS):

http://vitalstocks.com/blog/2006/10/david-fried-buyback-premium-portfolio.html

2D)  (HLT) - Exceeded analysts' earnings expectations in 12 out of the past 16 quarters by an average margin of 21.8%:

http://vitalstocks.com/blog/2006/10/hlt-exceeded-analysts-earnings.html

2E)  (FRO) - (OMM) - Paul Tracy, StreetAuthority Market Advisor newsletter - direct play on burgeoning global trade is the transportation industry:

http://vitalstocks.com/blog/2006/10/fro-omm-paul-tracy-streetauthority.html

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3) Viewing the Market:  Financial analysts / journalists comment on the current stock market and future direction.

3A) Danger Ahead

Dennis Slothower, editor of the On the Money-E newsletter, doesn’t see a lot of upside potential in the near future, but he does see a lot of risk right after the elections. Read this featured expert’s commentary on the market and politics. Also, discover what he has to say about one company’s earnings announcement possibly setting a pattern over the next couple of weeks.

Market Commentary from October 11

On a short-term basis the market is once again overbought, so it isn’t too much of a surprise to see the stock market give up some ground today as the first set of earnings announcements are released.

Alcoa Inc. (AA) announced their earnings missed forecasts, which could set the pattern of corporate earnings in general over the next couple of weeks.

However, it is pretty clear that the market isn’t focused on corporate earnings. It expects them to be soft.

Dennis Slothower thinks the market is focused on what the Fed is doing just ahead of the mid-term elections and the games being played out to drive crude oil prices lower and stocks higher to win votes.

This became clear today with the Fed minutes from their last FOMC meeting. The Fed reinforced their concern about higher inflation and even left opened the possibility that they may well raise interest rates again in the near future in order to battle inflation.

So what really is the Fed target here? What games of psychology are they playing? Driving crude oil prices lower just ahead of the mid-term elections should win votes. Watching crude oil plunge $22 a barrel in two months, or 28% has been winning over the stock market, as market breadth broadens and investors gain more confidence.

Meanwhile, OPEC wants to cut oil production. All 11 members agree on the need for a cut. But Saudi Arabia hasn’t said much on the issue, and apparently will not cut November exports to the U.S. just before the mid-term elections. So what is the stock market going to do for the next two or three weeks? It looks like the powers that be want the stock market to appear stable going into the elections. The Dow 30 is very likely to hit 12,000 perhaps at the month end window dressing, peaking the first week of November. The Dow is only 148 points away.

Meanwhile, investors are growing confident. The Democrats are growing excited about their chances at winning both houses. Investors are buying blue chip stocks, or corporations that would benefit under the Democrats. The Republicans hope to rally back and are buying red stocks, so the market is getting a lift in both directions.

Now, of course, one wonders what is going to happen after the elections. Which side will sell their positions to align with the realities of the party in charge?

Though it appears OPEC can’t seem to make up its mind about oil production cuts just ahead of the elections, Slothower wonders what they’ll do after the elections. Saudi Arabia may be helping the republicans by dragging their feet on the OPEC cuts. They may only need to do this for a few more weeks. Then they can heartily join their other OPEC ministers in a confident stance.

While the Fed is talking tough and threatening more rate hikes, which is driving up the US dollar and hurting commodities, will they continue to talk tough after the elections?

All of the tough Fed talk is working a number on the long bond. Slothower doesn’t know if you have been watching the 30-year bond lately, but it has been dropping rather fast recently. Bond traders do not like the idea of potential rate hikes going forward.

And guess what this tough talk is doing to mortgage rates? It is driving them up again – just what the plunging housing market needs, right?

As Slothower said, short cycles are overbought and both the Dow and S&P 500 are testing their long-term primary trend resistance levels at the top of their three plus year trading channels. Slothower doesn’t see a lot of upside potential in the near future, but he does see a lot of risk right after the elections.

Slothower thinks this is becoming a dangerous market and capital preservation should not be ignored in this pre-election euphoria. Politicians and the stock market don’t make good bed partners right now.

Source: http://www.zacks.com/experts/featured/view_article.php?art_id=2683&newsletter_id=26

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What do we pick?

VitalStocks newsletter presents the two best ideas from the commentary of the week.  Here is the secret:  We take all those ideas and compare each stock to various industry averages.

Professionals pay thousands of dollars per year for access to this information.  Our publishers feel some investors need to take a test drive before purchasing the investing newsletters of their choice.

Submit all comments or ideas: webmaster@vitalstocks.com

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3B) Where to Now?

Steve McKee, editor of the No-Load Mutual Fund Selection and Timing Newsletter, explains that the recent climb by the Dow Industrials is not necessarily a sign of what’s to come. Learn what this featured expert has to say about the decelerating economy and find out what he is recommending for investments. Afterward, take a look at some of the mutual funds on McKee’s Top 5% Funds list.

Commentary from October 5

With the Dow Industrials finally making it back to its pre-bubble bursted peak in 2000, the question naturally arises where to now?

To see into the future, it helps to survey the landscape, asking where are we now?

While the Industrials are now at a peak, the previous leader the Transports is now lagging. This is a bearish sign, indicating a slowing economy as the Transports reflect the movement of goods and people worldwide.

The economy is decelerating noticeably. In the first quarter, GDP was 5.6%. In the second quarter, GDP was 2.6%. The third quarter advance reading is due 10/27, but the Fed is expecting further slowdowns due mainly to the housing decline.

Regardless of the housing data, however, are the leading economic indicators. They have been dropping. This too signals recession. The next reading is due 10/19.

The fourth indicator to examine is the inverted yield curve. It’s worse than it was previously, but no one is paying attention any more. Short rates are still around 5%, while longer term rates are down around 4.5-4.75%. This too is bearish.

It’s one thing to bet with the Fed, but a whole ’nother thing to bet against them. This is especially true since they’re communicating against the market, saying we know the economy is slowing, that housing is tumbling, but we’re more concerned with inflation and its prospects.

Inflation is way above trend. The Fed’s comfort zone is between 1-2%. Instead it’s running at 2.5%. Lest you think the recent drop in energy prices will help, remember this personal consumption index, their favored indicator, is sans energy and food prices. If anything, it may climb further because of the lower energy prices, which may translate into higher consumption, more inflation.

So, where to now? Lower is the word. Large value, growth and income is where to invest.

A Sampling of Top 5% Funds by C
C measures the risk (V) adjusted relative performance between fund and market (CS).

Yacktman (YACKX), incepted in July 1992, Yacktman Asset Management Co. is the investment adviser to the fund. The fund seeks long-term capital appreciation and, to a lesser extent, current income. The fund mainly invests in common stocks of United States companies, some, but not all of which, pay dividends. The fund's investment adviser employs a disciplined investment strategy. They buy growth companies of any size at what they believe to be low prices. This approach combines the best features of 'growth' and 'value' investing. The fund may invest in companies of any capitalization. The fund distributes substantially all of its net investment income and substantially all of its capital gains annually. C=28.9

FBP Contrarian Balanced (FBPBX): Flippin, Bruce & Porter, Inc manages the fund. The investment objective of the fund is long term capital appreciation and current income through investment in a balanced portfolio of equity and fixed income securities assuming a moderate level of investment risk. In seeking to achieve the investment objectives a "contrarian" investment strategy is used. Contrarian investing seeks to acquire the securities of companies that, in the advisor's judgment, are undervalued, usually because they are out of favor with most of the investment community. A company's securities may be out of favor due to earnings declines, business or economic cycle slumps, competitive problems, litigation, product obsolescence and other reasons. The fund invests in both equity and fixed income securities. Equity securities are acquired for capital appreciation or a combination of capital appreciation and income. Fixed income securities, which include corporate debt obligations and U.S. Government obligations, are acquired for income and secondarily for capital appreciation. The percentage of assets invested in equity securities, fixed income securities and money market instruments will vary from time to time depending upon the advisor's judgment of general market and economic conditions, trends in yields and interest rates and changes in fiscal or monetary policies. The fund distributes dividends quarterly and capital gains annually. C=28.0

Primary Trend (PTFDX) was incepted in September 1986 and is managed by Arnold Investment Counsel Incorporated. The fund seeks capital growth and income. The fund invests primarily in common stocks of U.S. companies. Typically the fund invests in well established mid to large-capitalization companies (market capitalizations of $3 billion or more) having an operating history of ten or more years. The fund's investment adviser favors "value" stocks and shuns stocks where the price reflects a premium because of their popularity. The fund's investment adviser considers a number of financial characteristics such as earnings growth, book value, dividends, asset value and liquidation value in determining whether or not a company's stock is undervalued. Dividends and capital gains are distributed annually. C=27.7

Source: http://www.zacks.com/experts/featured/view_article.php?art_id=2680&newsletter_id=159
 

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4) Feature Stock #1 – IndyMac Bancorp (NDE)

John Reese, editor of the Validea Hot List newsletter, notes that the Validea Hot List has grown nearly five times the 35.3 percent increase in the S&P 500 during the same period. Find out the percentage gain for the Hot List. Then receive an update on the year-to-date and more recent gains of the Validea versus the S&P 500. Afterward, learn about an addition to this featured expert’s portfolio as well as a couple other Hot List holdings.

Validea Hot List Performance from October 6

Since inception, the Validea Hot List has grown 166.6 percent, nearly five times the 35.3 percent increase in the S&P 500 during the same period. Year-to-date, the Validea Hot List is up 20.1 percent, more than double the 8.4 percent gain of the S&P 500. And since the last issue of the newsletter two weeks ago, the Validea Hot List is up 3.5 percent, at a time when the S&P 500 rose 2.7 percent.

An Addition to the Hot List

IndyMac Bancorp (NDE)

This company is favored by two guru strategies. One of the gurus is David Dreman.

The strategy based on David Dreman's approach to investing likes IndyMac. IndyMac passes three contrarian tests: being in the bottom 20 percent of the market for P/E ratio, price-to-cash flow ratio and price-to-dividend ratio.

As indications of the company's financial health, it has a strong return on equity of 21.16 percent, pre-tax profit margins of 44.91 percent (way above the 8% minimum required) and a strong yield of 4.5 percent.

Other Hot List stocks include:

Chevron Corp. (CVX), formerly ChevronTexaco Corporation, manages its investments in subsidiaries and affiliates, and provides administrative, financial and management support to the United States and foreign subsidiaries that engage in integrated petroleum operations, chemicals operations, coal mining, power and energy services. Petroleum operations consist of exploring for, developing and producing crude oil and natural gas; refining crude oil into finished petroleum products; marketing crude oil, natural gas and the many products derived from petroleum, and transporting crude oil, natural gas and petroleum products by pipeline, marine vessel, motor equipment and rail car. Chemicals operations include the manufacture and marketing, by affiliates, of commodity petrochemicals for industrial uses, and the manufacture and marketing, by a consolidated subsidiary, of fuel and lubricating oil additives.

Tower Group, Inc. (TWGP) offers a range of specialized property and casualty insurance products and services to small to mid-sized businesses and to individuals in New York State and the surrounding areas through its wholly owned subsidiaries, Tower Insurance Company of New York (TICNY), Tower National Insurance Company (TNIC) and Tower Risk Management Corporation (TRM). TICNY is a property-casualty insurance company. TNIC is a property and casualty insurance company. TRM is a non-risk-bearing insurance services company that produces, through its managing general agency, business on behalf of other insurance companies. The Company's commercial lines products provide insurance coverage to businesses, such as retail and wholesale stores, grocery stores, restaurants, artisan contractors, and residential and commercial buildings, while its personal lines products focus on modestly valued homes and dwellings. Tower operates in three segments: Insurance, Reinsurance and Insurance Services.

This article highlights the commentary of John Reese for the Zacks.com audience. John Reese provides insightful analysis, market commentary, and favorite recommendations on a timely basis in "The Validea Hot List" newsletter. Try it free for 30 days and see if you can improve your investment performance. Learn more about "The Validea Hot List" and 30-Day Free Trial. And get immediate access to current issues and special reports. Click here now

Here’s How You Can Profit from the Pros
Find out what other leading experts are saying about the market. And what stocks they are recommending. For free. Just sign up for our free email newsletter, Profit from the Pros, where we’ll give you the commentary, advice, and insight from those rare few experts who consistently beat the market year in, year out.

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Actionable, Professional Research updated daily

Our daily professional research content blog is up and running.  We post new research daily.  See it here:  http://www.vitalstocks.com/blog/index.html

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VitalStocks.com Research Summary:
Data as of: 12 Oct

Price / Cash Flow Ratio is 33.94% of the Industry Average.

Forward Price to Earnings Growth (PEG): 0.75

Debt / Equity Ratio is 0.0% of the Industry Average.

Net Profit Margin is 95.0% of the Industry Average.

Return on Equity is 163.5% of the Industry Average.

Current P/E Ratio is 44.22% of the Industry Average.

5-Year Avg. Pre-Tax Profit Margin: 104.56% of the Industry Average.

Price/Sales Ratio is 44.69% of the Industry Average.

Income Per Employee is 63.99% of the Industry Average.

MSN Money Price Target:  http://moneycentral.msn.com/investor/research/wizards/srwtarget.asp?Symbol=nde

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5) Feature Stock #2 – Swift Energy (SFY)

Richard Moroney, editor of the Upside newsletter, explains that a growing number of small and midcap companies are capitalizing on opportunities abroad. Take a look at a sampling of a list of stocks that this featured expert has labeled as Overseas Sales Leaders. One of the overseas plays is a company that ranks among the top three providers of pawn loans in Mexico. Another is a maker of computerized machine systems for the metalworking industry.

STOCK PICKS

Seeking growth? Consider foreign exposure

While U.S. economic growth is widely expected to slow in 2007, the outlook overseas is considerably brighter. In September, the International Monetary Fund trimmed expectations for U.S. growth to 2.7% in 2007, down from the 3.1% expected for 2006. But the IMF lifted slightly its expectations for the world economy, predicting global growth of 4.9% in 2007 versus 5.1% in 2006.

Other forecasters expect the divergence to be even more extreme. Economists at Merrill Lynch predict U.S. growth will slow to 1.9% in 2007 from 3.4% in 2006, reflecting a correction in the housing market and weaker consumer spending. Because of growth in Asia and developing nations, however, Merrill expects growth outside the U.S. of 5.2% in 2007 — down from 5.7% in 2006 but still very healthy by historical standards.

For investors in U.S. stocks, the important question is not whether overseas growth will be 4% or 6%. What matters is whether you can find opportunities to capitalize on likely pockets of growth. While U.S. investors typically look to large-company stocks for foreign exposure, a growing number of small and midcap companies are capitalizing on opportunities abroad. Because small companies usually have more focused product lines, they can provide more targeted plays on attractive growth niches.

Reviewed in the following paragraphs are a few high-quality small companies with attractive overseas prospects. All companies seem positioned for healthy profit growth over the next 12 to 18 months, partly because of gains overseas.

A Sampling of Overseas Sales Leaders

First Cash Financial Services (FCFS), the third-largest provider of pawn loans in the U.S., also ranks among the top three providers of pawn loans in Mexico. Pawn loans, usually lasting about one month, are secured with personal property held as collateral. First Cash operates 147 pawn stores in Mexico and 97 in the U.S. It also has 126 payday-lending stores in the U.S.

Most of the company's recent growth in pawn shops has been in Mexico. Many of its Mexican pawn shops are relatively new, so their contribution to profits should swell in 2007 as stores mature.

Revenue and profit growth has been strong across First Cash's product lines and geographic markets. The August acquisition of Auto Master should broaden the company's product line and bolster near-terms sales and earnings growth.

Hurco (HURC), a maker of computerized machine systems for the metalworking industry, has delivered strong sales and profit growth, driven by overseas operations. July-quarter sales and service fees jumped 35% in Europe and 36% in Asia. Demand in those regions, accounting for 69% of total sales in the quarter, has benefited from strong demand for expensive models. Order rates in the U.S. rose only slightly last quarter, but gains overseas fueled a 32% increase in total orders.

Hurco serves a wide range of industries, including aerospace and defense, medical equipment, energy, transportation, and computer equipment.

At nine times estimated year-ahead earnings of $2.68 per share, the stock seems undervalued considering its growth prospects.

Other Overseas Sales Leaders include:

Men's Wearhouse (MW) is one of the largest specialty retailers of menswear in the United States and Canada. Under the Men's Wearhouse brand, the company targets middle and upper middle income men by offering quality merchandise at everyday low prices. In addition to value, Men's Wearhouse, Inc. provides a superior level of customer service.

Swift Energy (SFY) engages in the development, exploration, acquisition, and operation of oil and gas properties with a primary focus on U.S. onshore natural gas reserves located in Texas and Louisiana. The company currently focuses on development and exploration in four core areas: AWP Olmos in Southern Texas; Brookeland in Eastern Texas; Giddings in south-central Texas; and Master Creek in Western Louisiana.

Teledyne Technologies (TDY) is a leading provider of sophisticated electronic and communication products, systems engineering solutions and information technology services, and aerospace engines and components. The company customers include aerospace prime contractors, general aviation companies, government agencies and major communications and other commercial companies.

This article highlights the commentary of Richard Moroney for the Zacks.com audience. Richard Moroney provides insightful analysis, market commentary, and favorite recommendations on a timely basis in "Upside" newsletter. Try it free for 30 days and see if you can improve your investment performance. Learn more about "Upside" and 30-Day Free Trial. And get immediate access to current issues and special reports. Click here now.

Here's How You Can Profit from the Pros
Find out what other leading experts are saying about the market. And what stocks they are recommending. For free. Just sign up for our free email newsletter, Profit from the Pros, where we'll give you the commentary, advice, and insight from those rare few experts who consistently beat the market year in, year out.

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Actionable, Professional Research updated daily

Our daily professional research content blog is up and running.  We post new research daily.  See it here:  http://www.vitalstocks.com/blog/index.html
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VitalStocks.com Research Summary:
Data as of: 12 Oct

Price / Cash Flow Ratio is 43.69% of the Industry Average.

Forward Price to Earnings Growth (PEG): 0.28

Debt / Equity Ratio is 110.87% of the Industry Average.

Net Profit Margin is 147.16% of the Industry Average.

Return on Equity is 82.14% of the Industry Average.

Current P/E Ratio is 86.54% of the Industry Average.

5-Year Avg. Pre-Tax Profit Margin: 111.76% of the Industry Average.

Price/Sales Ratio is 51.31% of the Industry Average.

Income Per Employee is 62.54% of the Industry Average.

MSN Money Price Target:  http://moneycentral.msn.com/investor/research/wizards/srwtarget.asp?Symbol=sfy

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6) Additional Stocks - Worth a Further Look

6A) Knightsbridge Tankers Limited (VLCCF)

(VLCCF) - The company exceeded analysts' estimates in five out of the past eight quarters by an average margin of 50.7%

Knightsbridge Tankers Limited (VLCCF), a Zacks #1 Rank stock, topped the Street's earnings estimate in five out of the past eight quarters by an average margin of 50.7%. Consensus estimates increased dramatically over the past two months. The company has a price-to-book ratio of 2.2, compared to 5.3 for the market. VLCCF's return on equity is nearly double that of the industry average--27% compared to 15%.

Full Analysis

Knightsbridge Tankers Limited is an international tanker company whose primary business activity is the international seaborne transportation of crude oil. The company's fleet consists of five double-hull crude oil carriers.

When VLCCF tops the Street's earnings estimate, it usually does so by a very large margin. The company exceeded analysts' estimates in five out of the past eight quarters by an average margin of 50.7%.

On Aug 11, VLCCF announced second-quarter profits of $7.9 million, or 46 cents per share. Compared to the second quarter of 2005, this marked a 7.0% year-over-year improvement. It also represented a 7.0% positive surprise. Operating revenues jumped 13.4% to $23.7 million.

Consensus estimates increased dramatically over the past 60 days. Profit forecasts for this quarter and next are up 284.2% and 157.1%, respectively. Estimates for the full years of 2006 and 2007 have also experienced a considerable leap, rising 64.5% and 43.3%, respectively.

Investors requiring a stream of cash flow from their investment in VLCCF have enjoyed a current dividend yield of 12.8%. During the second quarter, the company used $2.9 million of its cash to repay its loan and credit facilities, while $17.1 million was distributed via dividend payments. On Aug 11, the Board of Directors authorized a quarterly cash dividend of 80 cents per share.

When examining VLCCF's level of profitability, as measured by its return on equity, investors will notice that the company is superior when compared to the industry average--27% compared to 15%.

VLCCF is currently trading at a valuation of 10.3x trailing 12-month earnings and at 8.3x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 17.1x trailing 12-month earnings and at 16.1x its current fiscal-year estimated earnings. The company has a price-to-book ratio of 2.2, compared to 5.3 for the market.

Source: http://vitalstocks.com/blog/2006/10/vlccf-company-exceeded-analysts.html

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6B) The Procter & Gamble Company (PG)

NOTE: While not being selected one of the two top weekly stocks, PG did score well in our screen. In the tradition of the newsletter, we offer two "other" picks that did not make the cut, but are worthy of consideration. PG had three articles commenting on it this week.

Charles Carlson, editor of the DRIP Investor newsletter, highlights a large-company defensive name that is a leading provider of household products. Read this featured expert’s commentary and receive an update in the company’s recent performance. Afterward, learn Carlson’s outlook on the stock.

P&G A Play on Large Caps, Defensive Stocksfrom October 2

An emerging theme in the stock market is the rebound in large-company stocks, especially mega-cap stocks. A parallel theme is the continued attraction of “defensive” stocks — companies whose business models should hold up regardless of economic conditions. One stock that fits both of these themes nicely is Procter & Gamble (PG). The company, a component of the Dow Jones Industrial Average, is a leading provider of household products. The firm should see its top and bottom lines hold up even if the economy slips. Profits are expected to be a record in the current fiscal year, and long-term prospects are excellent.

Charles Carlson has owned Procter & Gamble stock for several years and has been rarely disappointed. DRIP investors should consider these shares a core holding for any portfolio.

Corporate Profile

Procter & Gamble is the home of some of the strongest consumer brands in the world. Brands include Tide, Swiffer, Cascade, Head & Shoulders, Olay, Sure, Pampers, Charmin, Bounty, Pringles, Crest, and Prilosec OTC. The firm expanded its operations with the October 2005 acquisition of Gillette.

Fiscal 2006 ended in June was a solid year for the company. Net sales increased 20% for the fiscal year. The firm achieved organic sales growth of 7%, with every business segment delivering organic sales growth for the fiscal year. Excluding dilution from the Gillette acquisition, earnings per share rose around 12%. The company’s efficient operations generated $8.7 billion in free cash flow for the fiscal year. That cash generation gives the firm plenty of options in the way of future acquisitions and stock buybacks.

P&G, trading at 21 times fiscal 2007 earnings estimate, is not a cheap stock. Still, these shares merit a premium valuation given the company’s steady performance. Dividend investors take note that Procter & Gamble’s payout has more than doubled since 1999. The company currently pays a quarterly rate of $0.31 per share, giving the stock a yield of 2.0%.

Conclusion

Steady, dependable growers will be highly prized should Wall Street fears of a slowdown in corporate earnings increase. Procter & Gamble is the antidote for uncertainty. While the stock is not likely to be at the top of the leader board in any one year, Carlson expects these shares to produce market- beating returns over the next several years. Please note that Procter & Gamble’s direct-purchase plan permits initial purchases with a minimum $250.

Source: http://www.zacks.com/experts/featured/view_article.php?art_id=2673&newsletter_id=34

(PG) - Free cash flow generation continues to be quite impressive

The Procter & Gamble Company (PG) exceeded analysts' earnings estimates for 13 straight quarters, and in 15 out of the past 16. The company increased profits, expanded gross margins and grew profits for five years running. PG continues to expand its portfolio of brand name products through both internal development and by acquisition. Growth in free cash flow has led to a current dividend yield of 2.0% and a five-year average dividend yield of 1.9%.

Full Analysis

The Procter & Gamble Company and its subsidiaries engage in the manufacture and marketing of various consumer products worldwide. The company's products are sold through mass merchandisers, grocery stores, membership club stores and drug stores.

PG's history of exceeding analysts' earnings expectations is truly incredible. The company beat the Street's estimate in 13 consecutive quarters and in 15 out of the past 16. PG matched the consensus estimate in the one quarter where it failed to surprise. Earnings per share grew 12.5% over the past five years and are forecasted to grow 11.1% over the next 3-5 years.

On Aug 2, PG reported fiscal 2006 fourth-quarter profits of $1.9 billion, or 55 cents per share. Analysts were calling for earnings per share of 54 cents. Revenues soared 25.1% to $17.84 billion from $14.26 billion in the prior-year period. Price increases across several of the company's business segments, coupled with the business associated with its acquisition of Gillette, fueled revenue growth.

For the entire year, profits jumped 25.4% to $8.68 billion from $6.92 billion in fiscal 2005. Revenues climbed 20.2% to $68.22 billion from $56.74 billion last year. Chairman of the Board, President and Chief Executive A.G. Lafley stated, “This marks the fifth consecutive year in which P&G has delivered topline growth at or above the company's targets.” PG increased profits, expanded gross margins and grew profits for five years running.

PG continues to expand its portfolio of brand name products both through internal development and by acquisition. The company has also excelled at creating entirely new product categories. Recent examples of successful new categories include Swiffer in the surface cleaning category, the fat substitute Olean and Febreze in the fabric spray category.

PG's free cash flow generation continues to be quite impressive. The company generated $6.5 billion of free cash flow in fiscal 2005. In fiscal 2006, it ballooned 33.9% to $8.7 billion. The excess cash is frequently put towards product innovations, acquisitions and brand development. Furthermore, PG has a current dividend yield of 2.0% and a five-year average dividend yield of 1.9%. The dividend was boosted last in March 2006 by 10.7% to 31 cents per share. The company has distributed dividends without interruption since it was incorporated in 1890. This year marked the 50th consecutive year in which the dividend was increased.

PG is a Zacks #2 Rank (Buy) stock. Zacks #2 Rank stocks have generated an average annual return of 21.6% since 1988. Because the Zacks Rank has a market cap bias, Growth & Income investors may find a greater number of large-cap stocks by considering both Zacks #1 Rank and Zacks #2 Rank (Buy) stocks in their selection criteria.

Content Courtesy: Zacks Investment Research

#1 Ranked Stocks Highlight Archive
To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

Source: http://vitalstocks.com/blog/2006/10/pg-free-cash-flow-generation-continues.html

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http://findinvestinfo.com/vstocks/nl/208

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