As we announced in last week’s video commentary, I am leaving Zacks. Though I enjoy my job, a great opportunity was presented to me.

Our Director of Research, Sheraz Mian, will take over my duties. Over the years, I’ve spent a lot of time speaking with Sheraz about the markets and stocks and can assure you that you will be in good hands. Furthermore, we rely on Zacks Equity Research recommendations for selecting stocks for the Focus List. Finally, and most importantly, the committee that has helped me manage our portfolios is remaining intact. Therefore, I think you will find the transition to be smooth.

In terms of investing philosophy, one of the things that I will take with me is a stronger appreciation of earnings estimate revisions. I paid attention to consensus estimates prior to joining Zacks, but not with the same level of awareness that I now have. The difference being the greatly increased attention I give to revisions, in particular whether profit projections are rising or falling.

As you know, at Zacks, we heavily promote the concept of following earnings estimate revisions. The philosophy is simple, buy when estimates are rising and sell when estimates are falling.

It may sound a good marketing scheme, but the reality is that it really does work. This is particularly the case when estimates are rising on several companies within the same industry or sector. I can personally tell you that tracking earnings estimate revisions tipped me off to big rallies in copper, fertilizer and, most recently, tech stocks. They also helped tipped me off that there were problems with American International Group (AIG) in February 2008 – well before the financial system fell into a crisis.

I believe in earnings estimate revisions so much that I specifically discuss them in my forthcoming book on investing. Trust me, if you want to do a gut-check on your personal investing philosophy, write a book about it. There is nothing in my book that I don’t fully believe in. (The book is tentatively scheduled to be published in the first quarter (probably March 2010) by W&A Publishing. I’d tell you the title, but the publisher and I have not finalized what it will be.)

If the only thing you ever do with earnings estimates is to check whether they are being raised or lowered, you will be one step ahead of the game. Earnings estimates are not a substitute for conducting other analysis, such as making sure the valuation is attractive or that the business model is sound, but they are a vital tool for identifying profitable investments.

I’ll be at Zacks through the remainder of the week and you can email me here at crotblut@zacks.com. You can also follow me on Twitter at http://twitter.com/charlesrotblut, even if you don’t have a personal twitter account.

Portfolio Updates

Coach (COH) was added to the Growth & Income portfolio. The company has successfully gone after the “affordable luxury” market with high quality products priced below the likes of Prada and Gucci. Furthermore, the company continues to make inroads into China. We liked the fact that COH’s fiscal first-quarter profits were well above the Zacks Consensus and that overall sales are holding steady despite the still questionable economic backdrop.

Skyworks Solutions (SWKS) was sold from the Focus List. Earnings estimates for fiscal 2010 have fallen. At the same time, the share price has lagged. Rather than risk a potential loss, we decided that the prudent was to lock in the gain.

The Markets

The major indexes have been trading a fairly tight range, despite better-than-expected earnings. Such action is not surprising given that the rally has lasted for more than 7 months. The Dow seems have found near-term resistance at 10,160.

One of the things I will be watching this week is the advance GDP report. I think the risk for stocks is to the downside, especially if the number comes in below 3%. (Economists are projecting GDP growth of 3.1%).

Volume continues to be light overall, suggesting an ongoing lack of conviction. With a few exceptions (e.g. Apple (AAPL)), positive earnings surprises just don’t seem to be inspiring traders. This said, the bull continues to breathe.

I do think we will eventually end up in a prolonged trading range. It’s just a question of what that range will be.

Thanks for being a subscriber and allowing me to share my views on the markets and the economy. I wish you prosperity, good health and lots of happiness.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.
Zacks Investment Research

Last 5 posts by Charles Rotblut

• Earnings Preview for Oct 26 - 30 - Earnings Preview - October 23rd, 2009
• Zacks Industry Rank Analysis Highlights: Barrick Gold, Eldorado, Goldcorp, Freeport-McMoRan, Pan American Silver, Market Vectors Gold Miners, S&P 500 SPDR and Gold SPDR - Press Releases - October 22nd, 2009
• Gold Miners' Margin Problem - Zacks Industry Rank Analysis - October 21st, 2009
• Zacks Earnings Preview: Eastman Chemical, E.I. DuPont, T. Rowe Price, Western Digital and SuperValu - Press Releases - October 19th, 2009
• Earnings Preview for Oct 19-23 - Earnings Preview - October 16th, 2009