Zacks.com Featured Expert Kevin Matras Highlights: Alliance Capital Management Holding, Mesa Air Group and Reliance Steel & Aluminum

Business Wire, Oct 5, 2005

CHICAGO -- Kevin Matras goes over a screen that's handily beating the market this year. Stocks in this week's article are: Alliance Capital Management Holding, LP (NYSE:AC), Mesa Air Group, Inc. (NASDAQ:MESA) and Reliance Steel & Aluminum Co. (NYSE:RS). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109

Screen of the Week written by Kevin Matras of Zacks Investment Research:

This week, Kevin is writing about a screen that uses a lot of the ideas that he has written about in past articles, combined together into a powerful and consistently profitable stock picking strategy. In fact, so far this year (YTD thru 9/16/05), the average cumulative gross return is up 37.4%!

The parameters;

--P/E using 12 month EPS Actuals less than or equal to 40 (Kevin has written about why focusing only on stocks with P/E's of 20 or less would've kept you out of some of the best stocks over the years. And that a P/E of 20 or less isn't a 'magic number' either. So in this screen, Kevin allowed stocks to have a P/E ratio of as high as 40.)

--Price to Book less than or equal to 2 (Kevin has also shown that a Price/Book value of 1 or less is not a 'magic number.' In fact, many of the best stocks started with P/B's of 2 and 3 and 4. For this screen, he limited it to 2.)

--Price greater than or equal to 5 (Most money managers won't even look at a stock under $5, so Kevin used this as a minimum price point.)

--Volume (20 day average) greater than or equal to 50,000 (Anything under 50,000 shares traded daily is excluded -- it has to be tradable.)

--Zacks Rank less than or equal to 2 (The Zacks Rank is probably one of the best, if not the best rating systems out there. So only stocks with a Zacks Rank of a 1 or 2 (Strong Buy or Buy) are allowed.)

--% Change Actual EPS Growth Q(0)/Q(-1) greater than or equal to 0 (Kevin is looking for the last Quarter over Quarter EPS Growth to be at the very least flat to positive. (Q(0) being last Quarter and Q(-1) being the Quarter prior to the last Quarter.)

--% Change in Q(1) Estimates over 4 weeks greater than or equal to 0 (And Kevin wants the Earnings Estimates for the Current Quarter to be increasing. (Q(1) being the Current Quarter.)

--% Change in Price over 4 weeks greater than or equal to 0 (The stocks have to have either increased in price over the last 4 weeks or at the very least, stayed steady. Any stock with a net breakdown in price over the last month is ignored.)

--Return on Equity -- Top # 5 (What this means is Kevin is narrowing down all of the stocks that qualified the above parameters, to only the five with the best (highest) Return on Equity (ROE). And the ROE is one of the quickest ways to see whether a company is creating assets with Investors' Cash or gobbling it up.)

The Results:

Kevin ran a series of tests over the last 4 3/4 year time span (2001 thru 9/16/2005), as well as a series of tests for each of the last 4 3/4 yrs. individually. He rebalanced the portfolio every four weeks and started each run on different start dates so each test would be rebalanced over a different set of four-week periods. (This exercise was done to eliminate coincidence and verify robustness.)

Over the last 4 3/4 years, this strategy has shown an average annualized gross return of 56.7% a year, with an average win ratio (winning periods divided by the total number of periods) of 71%. And again, it always only produces five stocks for your portfolio each month.

To break it down further; in 2001, the average annualized gross returns were 48.1%. In 2002, the average annualized gross returns were 34.2%. In 2003, the average annualized gross returns came in at 101.7%! In 2004, the average annualized gross returns were up 55.5%. And so far in 2005 (YTD thru 9/16/05), the average cumulative gross returns are up 37.4%.

(Kevin would also like to note that he successfully tested this strategy with as few as only three stocks per period and as many as 10 stocks per period and they too came out with very impressive returns as well.)

Of the five stocks that made it thru this screen this week (10/3/05), here's three of them:

AC    Alliance Capital Management Holding, LP
MESA  Mesa Air Group, Inc.
RS    Reliance Steel & Aluminum Co.

Get the rest of the stocks on this list and start using this winning strategy in your own portfolio. You can do it. Sign up now for your free trial to the Research Wizard and start making better decisions today. http://at.zacks.com/?id=111

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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