Zacks.com Announces That John Reese Highlights the Following Stocks: Posco, Telecomunicacoes de Sao Paulo S.A., New Century Financial, Petroleo Brasileiro S.A., and Westpac Banking

Business Wire,  Jan 31, 2005  

• E-mail
• Print
• Link

CHICAGO -- John Reese's Hot List has performed well in a very difficult market environment. Discover how far the Hot List has advanced versus the market and read about Posco (NYSE:PKX), Telecomunicacoes de Sao Paulo S.A. (NYSE:TSP), New Century Financial Corporation (NYSE:NEW), Petroleo Brasileiro S.A. (NYSE:PBR), and Westpac Banking Corporation (NYSE:WBK). John Reese is editor of the Validea Hot List newsletter. Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=84

Highlights from the January 28th Featured Expert column by John Reese includes:

Since John Reese and his team's last issue, the Hot List has performed very well in a very difficult market environment. The portfolio was up 2.5% over the past two weeks, easily beating the S&P 500's .3% loss over the same period. For the year, the Hot List is up 1.2% and the market is down 3.1%.

Additions to Hot List

Posco (NYSE:PKX) is Korea's largest steel manufacturer and the fifth largest in the world. It manufactures and sells a line of steel products, including hot rolled and cold rolled products, plates, wire rods, silicon steel sheets and stainless steel products. The company sells primarily to the Korean market, with Korean sales accounting for 68.9% of its total sales volume. Two of Reese's guru strategies have a "strong" interest in Posco, including:

Peter Lynch Strategy

According to this methodology, based on Reese's reading of Lynch's approach, PKX is a "slow grower," because it has had single-digit earnings growth of 5.97%, based on its historical EPS growth rate. The reason for investing in slow growers is for their dividend yield. PKX would fall into the "dividend payers" category according to this methodology. The first requirement of a slow grower is that its sales exceed one billion. PKX's sales are $30.1 billion.

When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for PKX was 11.64% last year, while for this year it is 11.63%. Since inventory to sales has not changed appreciably, PKX passes this test.

This methodology also maintains that the yield of a "slow grower" should be high, which includes being higher than the S&P average (currently 1.93%), and at least 3%. This yield is required because dividends are the main reason for investing in "slow growers." The yield for PKX is 5.33%, so it passes this test.

Telecomunicacoes de Sao Paulo S.A. (NYSE:TSP) provides fixed-line telecommunications services in the state of Sao Paulo, Brazil. Two of Reese's guru strategies like Telecomunicacoes de Sao Paulo S.A., including:

John Neff Strategy

The John Neff strategy, based on Reese's reading of Neff's explanations of his investment approach, wants to see the P/E ratio for non-cyclical companies be between 40% and 60% below the market P/E. The current market P/E is 23.0, so the acceptable P/E range for this criteria is from 9.20 to 13.80. The current PE Ratio for TSP is 11.51.

For dividend payers, this strategy likes to see a historical earnings growth rate between 7 percent and 20 percent. The historical EPS growth rate for TSP is 10.3 percent.

The historical growth rate should be confirmed by the consensus future growth estimate of analysts for both the current fiscal year and the long term. As a result, both growth rates must be greater than 6% for dividend paying stocks. The projected future EPS growth rate for TSP is 31.9% for the current year and 10.9% for the long term; therefore, it passes this criterion.

Current Hot List Portfolio

New Century Financial Corporation (REIT) (NYSE:NEW) is a mortgage finance company operating in the United States. Through its operating subsidiaries, it provides first and second mortgage products to borrowers nationwide.

Petroleo Brasileiro S.A. (ADR) (NYSE:PBR) is Brazil's national oil company, and, directly or through its subsidiaries, is engaged in the exploration, exploitation and production of oil from reservoir wells, shale and other rocks, as well as in the refining, processing, trade and transport of oil and oil derivatives, natural gas and other fluid hydrocarbons, and other energy-related activities.

Westpac Banking Corporation (ADR) (NYSE:WBK) is a banking organization primarily operating in Australia and New Zealand. It provides a range of banking and financial services in retail, commercial and institutional banking and wealth management activities.

Learn more about John Reese's guru strategies favoring the stocks above, and take a look at the complete portfolio, by clicking: http://at.zacks.com/?id=85

About Zacks Featured Experts

Successful investing requires professional advice from knowledgeable experts who can help investors achieve their financial goals in good markets and improve their portfolios, especially in bad ones. That is why Zacks Investment Research has assembled the best investment experts in the business to offer their powerful advisory newsletters on all the major investment topics: Stocks, Mutual Funds, Bonds, Options, Futures etc.