Founded in 1971 in Seattle, Starbucks is one of the largest coffee retailers in the world.

Starbucks Beat by 14.29% in the Fiscal Fourth Quarter

On Nov 5, Starbucks reported its fiscal fourth quarter 2009 results and beat the Zacks Consensus Estimate by 3 cents. Earnings per share were 24 cents compared to the Zacks Consensus of 21 cents. That is a 140% increase over the 10 cents a share reported in the year ago quarter.

Revenue, however, fell 4% to $2.42 billion from $2.52 billion in the fourth quarter of fiscal 2008. Both the U.S. and International segments each saw a 4% decline in net sales. Comparable U.S. store sales slid 1% in the quarter.

By the end of fiscal 2009, the company had completed the majority of its previously announced store closings which included about 800 U.S. stores, 61 stores in Australia and 40 stores in other international markets.

Outlook for Fiscal 2010

With the majority of its store closings behind it, Starbucks appears more optimistic about the coming year. It is projecting revenue growth for fiscal 2010 in the low-to-mid single digits primarily due to what the company hopes is positive comparable store sales, a 53rd fiscal week and about 300 planned net new stores.

Starbucks is still looking overseas for its growth as it plans to open about 200 net new stores in the international market. In the United States, it will be looking to add about 100 net new stores.

Zacks Consensus Estimates Rise

Given the company's fourth quarter earnings surprise, analysts have moved to adjust estimates higher. The first quarter 2010 Zacks Consensus Estimate has jumped 3 cents to 26 cents in the last 7 days, with 5 analysts raising and 1 analyst lowering out of 15 total analysts.

Similarly, fiscal 2010 estimates rose 5 cents to 97 cents in the last week. Analysts expect 2010 earnings growth of 21.79%. Looking ahead, analysts are also bullish about fiscal 2011, projecting 15.41% earnings growth.

SBUX at 2-Year High

Starbucks' stock has been on quite a run. The Zacks #1 Rank (strong buy) stock has recently been hitting 52-week and 2-year highs.

Zacks Investment Research

Company Description

Nordstrom, a fashion specialty retailer, operates 179 stores located in 28 states. The company was founded in 1901 as a shoe store in Seattle. Today, Nordstrom runs 112 full-line stores, 64 Nordstrom Racks, 2 Jeffrey boutiques and 1 clearance store. In addition, Nordstrom serves customers through its online presence at http://www.nordstrom.com and through its catalogs.

Strong Momentum and Bullish Forecasts

The company has more than doubled the market's return over the past year. During the last 3 months, JWN saw even more bullish trading as shares nearly tripled the performance of the major averages.

Analysts are also bullish, lifting the full-year Zacks Consensus Estimate from $1.57 per share to $1.65 over the past month. The most accurate projection is more bullish at $1.68.

For the following year, the Zacks Consensus Estimate of $1.95 per share was increased from last month's $1.81. The most accurate estimate is even higher at $1.99.

Second-quarter forecasts of 34 cents per share climbed from 29 cents over the past month, which included a 1-cent bump in the last week.

Results for the third quarter are scheduled for release on November 12.

September Sales

Nordstrom recently announced that September same-store sales dipped by 2.4% year-over-year. Total sales of $720 million were up 0.3% from last year.

Strong Fundamentals

The company boasts a return on equity (ROE) of 25%, squashing the industry average of 7%. Nordstrom's net profit margin of 4% tops the industry average of 1.4%. The Growth and Income pick pays an industry-leading dividend yield of 2%. Zacks Investment Research

The Consumer Confidence Index dipped to 53.1 (1985=100) in September after jumping to 54.1% in August from 47.4% in July, although expected to increase to 57.2.  The Present Situation Index decreased to 22.7 from 24.9 from 25.4 last month. The Expectations Index edged down to 73.3 from 73.8 in August.  Consumers outlook of business conditions were less favorable while the short-term outlook was slightly more pessimistic while the labor market outlook was essentially unmoved.

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Chicago, IL – August 28, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: JPMorgan Chase & Co. (JPM), Banco Bilbao Vizcaya Argentaria (BBV), BB&T Corp. (BBT), Hewlett-Packard Co. (HPQ) and AMR Corp. (AMR).

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Here are highlights from Thursday’s Analyst Blog:

Thrifts Defy Troubles

Thrifts are required to have at least 65% of their loans as mortgages and other consumer loans, which makes them particularly vulnerable to the housing downturn. But banks have no such compulsion. However, the banking industry is likely to face further special assessments as more institutions fail during the recession.

The OTS supervised 794 thrifts as well as 459 holding company enterprises at the end of the quarter. The agency said that three thrifts had failed during the second quarter.

A total of 81 federally insured banks have failed so far this year. This includes several large thrifts. The failure of Seattle-based Washington Mutual Inc. last year was the biggest US bank failure ever. Washington Mutual, that involved thrifts, was acquired by JPMorgan Chase & Co. (JPM).

Among the others, recently, Guaranty Bank failed and was sold to BBVA Compass, the US arm of Spain’s second-largest bank Banco Bilbao Vizcaya Argentaria (BBV). The banking operations of Colonial were sold to BB&T Corp. (BBT).

HP Gets American Airlines Deal

Good news continues for Hewlett-Packard Co. (HPQ). After delivering modest third quarter results, the company won a deal with American Airlines parent AMR Corp. (AMR). According to the agreement, Hewlett-Packard will be developing a system for AMR, which will take care of pricing, reservations, flight information and check-in.

We believe this will improve the overall travel experience of American Airlines customers. This will specifically help the company in efficient baggage transfer, which will ultimately lead to lesser lost baggage, passengers getting updated information about cancelled or rescheduled flights and user-friendly check in process. The process may take around 4 to 5 years to set up. The pricing of the deal was not declared.

We believe that if Hewlett-Packard can execute this project efficiently, this experience will take the company a long way in winning similar projects from other major players in the airlines industry. Although the airlines industry is going through the doldrums as a result of the global economic downturn, every other carrier is looking to streamline their operations and we believe Hewlett-Packard can cater to that need.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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Although results for the quarter showed some improvement, overall performance of the industry remained uneven. Troubled assets at thrifts accounted for 3.52% of the industry's assets, up from 3.35% in the previous quarter. However, total value of troubled assets fell to $38.6 billion from $41 billion in the earlier quarter.

"Problem thrifts" on the agency's list are those which have significantly low capital reserves and other deficiencies. Their number rose to 40 from 31 sequentially and from 17 in the year-ago quarter.

According to the Office of Thrift Supervision (OTS), the uneven financial picture reflects the nation's weak job market and a generally depressed economic environment. Thrifts continued to set aside large amounts of money to protect against deteriorating loans. Though loan loss provisions declined slightly to $4.7 billion during the second quarter, it was the sixth-highest on record. We expect provisions to remain elevated until the housing and job markets stabilize.

New mortgage loans by thrifts fell sharply to $70.5 billion from $96.1 billion in the prior quarter and $128.3 billion in the prior-year period.

Thrifts are required to have at least 65% of their loans as mortgages and other consumer loans, which makes them particularly vulnerable to the housing downturn. But banks have no such compulsion. However, the banking industry is likely to face further special assessments as more institutions fail during the recession.

The OTS supervised 794 thrifts as well as 459 holding company enterprises at the end of the quarter. The agency said that three thrifts had failed during the second quarter.

A total of 81 federally insured banks have failed so far this year. This includes several large thrifts. The failure of Seattle-based Washington Mutual Inc. last year was the biggest US bank failure ever. Washington Mutual, that involved thrifts, was acquired by JPMorgan Chase & Co. (JPM).

Among the others, recently, Guaranty Bank failed and was sold to BBVA Compass, the US arm of Spain’s second-largest bank Banco Bilbao Vizcaya Argentaria (BBV). The banking operations of Colonial were sold to BB&T Corp. (BBT).

The company had previously reduced its annual dividend payout to $0.70 per share from $1.00 declared earlier, significantly down from $2.07 in 2008. The move is aimed at conserving liquidity in the current credit-constrained market.

In response to the continued economic downturn and rapidly deteriorating industrial real-estate fundamentals, ProLogis had already stopped all new initiatives and early-stage developments. The company is currently concentrating on increasing its liquidity and deleveraging its balance sheet through asset sale.

ProLogis owns and manages interests in over 2,500 distribution facilities, service offices, and properties spanning 475 million square feet (including properties under development) of space. During the first quarter of 2009, the company sold its operations in China and Japan to affiliates of GIC Real Estate, the real-estate investment arm of the Government of Singapore Investment Corporation.

During the second quarter, ProLogis sold about 136 properties with an average age of 20 years. Spanning across 14.2 million square feet, the properties were located in markets like Chicago, Houston, Dallas, Atlanta, Memphis, Northern and Southern California, Seattle, Portland, Phoenix, Washington DC and Northern New Jersey.

ProLogis is the best-positioned industrial REIT in the current scenario. However, we maintain our Neutral recommendation on the stock in view of the overall decline of the industrial real estate sector.

Chicago, IL – July 24, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: L-3 Communications Holdings, Inc. (LLL), Lockheed Martin Corporation (LMT), Raytheon Company (RTN), FLIR Systems (FLIR) and Sprint Nextel (S).

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Here are highlights from Thursday’s Analyst Blog:

L-3 Communications Displays Resilience

Before the opening bell, L-3 Communications Holdings, Inc. (LLL) opened its second quarter reporting sales growth of 5.6% year-over-year to $3.93 billion barely beating our estimate of $3.88 billion and consensus estimate of $3.84 billion.

Showing resilience the company despite a higher pension liability partially offset the fall in EPS as widely expected. Higher pension liability during the quarter was due to fall in value of pension plan assets. During the quarter EPS fell to $1.90 from $2.21 in the year-ago quarter. However on the way it beat our EPS expectation of $1.83 and street apprehension of $1.77. The pension “poison" in the second quarter has affected defense goliath Lockheed Martin Corporation (LMT) too, only Raytheon Company (RTN) has passed the quarter unscathed.

The bell ringer for L-3 Communications topline during the quarter was the Command, Control, Communications and Intelligence, Surveillance, and Reconnaissance (C3ISR) segment. Capitalizing on the current Pentagon focus on airborne ISR and networked communication systems for manned and unmanned platforms, topline grew 23.6%. While Specialized Products (SP) and Aircraft Modernization and Maintenance (AM&M) segments chipped. However limited downside came from the Government Services (GS) segment where topline shrunk 3% primarily due to the company’s change of status in the linguist services contract.

L-3 Communications improved its whole year EPS outlook by a dime to $7.25 – $7.35 from $7.17 – $7.32. The upsurge in guidance is fuelled by higher expected margins in the C3ISR segment, which is expected to absorb the expected lower margins in the Government Services and the AM&M segments. The company finished the quarter with funded orders worth $3.3 billion and funded backlog of $11.2 billion. However, the market wasn’t kind to all of its peers; FLIR Systems (FLIR) this morning lowered its revenue outlook and upper end of its expected EPS for the whole fiscal. We maintain our speculative BUY rating on LLL.

Sprint Expanding 4G Footprint

Sprint Nextel (S) recently announced the expansion of its fourth-generation (4G) wireless broadband service as the company plans to officially launch services in three more US cities of Atlanta, Portland and Las Vegas in August 2009. The third-largest US wireless carrier also plans to roll out 4G services in additional markets including Chicago, Dallas, Philadelphia, Seattle and Honolulu through 2009. Sprint is deploying its 4G network under the "Sprint 4G" brand based on the WiMax mobile broadband technology.

In early October 2008, Sprint became the first wireless operator to launch 4G mobile broadband services in the U.S with the official commercial service roll outs in Baltimore. The efforts to strengthen its 4G wireless leadership was further demonstrated by the launch of the nation’s first dual-mode mobile broadband service in December 2008, which operates on both 3G and 4G networks.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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Provenge, a therapeutic vaccine candidate being developed by Dendreon for the treatment of prostate cancer is likely to receive FDA approval in the first half of 2010. Unlike traditional vaccines that prevent diseases, Provenge treats it by stimulating the body's own immune system to attack cancer cells.

We remind investors that the company met with disappointment in 2007 when the FDA asked for further data before approving it. The disappointing news had caused the company to retrench 15% of its workforce and sent its shares on a downward journey.

However, in April 2009, Dendreon reported positive results from its IMPACT (IMmunotherapy for Prostrate AdenoCarcinoma Treatment) study of Provenge in men with advanced prostate cancer. Following the positive results, the company is once again gearing up to market Provenge once the FDA approval comes through.

Provenge has blockbuster potential; we estimate U.S. sales to be $120 million in 2010 and $200 million in 2011. If the drug is approved, we believe the company will be profitable in 2010. Dendreon will market Provenge in the U.S. on its own and we expect it to announce a partner for the drug in rest of the world soon.

Dendreon will market Provenge in the U.S. on its own. However, on a global basis, we anticipate a partner soon. Once sales start to flow, Dendreon can focus back on the development of its pipeline candidates once more.

Following the positive results announced in late April, Dendreon’s shares have been on the upswing and is trading above the $20 mark. The stock closed on July 2 at $23.48. We believe that the current share price represents an attractive entry point for long-term investors.

ProLogis Inc. (PLD), a publicly traded real investment trust (REIT), has recently sold most of its industrial buildings in North America for $561 million. The company had been marketing most of these assets for sale since late 2008 and expects to realize $200 million in net proceeds from the disposal. ProLogis further expects to sell an additional $96 million worth of properties in North America in the second half of 2009.

In response to the economic realities of constrained credit and rapidly deteriorating industrial real estate fundamentals, ProLogis had earlier stalled all new ventures and early-stage developments. The company is currently concentrating on increasing its liquidity and de-leveraging its balance sheet through sale of assets.

ProLogis is currently selling about 136 properties with an average age of 20 years. Spanning across 14.2 million square feet of space, the properties are located in various markets such as Chicago, Houston, Dallas, Atlanta, Memphis, Northern and Southern California, Seattle, Portland, Phoenix, Washington DC and Northern New Jersey. The blended stabilized cap rate is expected to be 8.89%.

With the recent transaction, ProLogis has generated $840 million from asset sales in 2Q09. The company had earlier received $151 million from contributions of stabilized properties to the ProLogis European Properties Fund II (PEPF II) and $128 million from the sale of a property in Japan. The company sold its Japanese property to GIC Real Estate (GIC), the real estate investment arm of the Government of Singapore Investment Corporation. In 1Q09, GIC had acquired all ProLogis properties in China and a part of its Japanese property fund interests for $1.3 billion.

In addition to proceeds from sale of assets, ProLogis had received $345 million of secured debt financing during 2Q09. With the new capital, the company addressed all its debt maturities in 2009 and reduced its corporate debt by over 25% ($2.7 billion) from September 30, 2008 levels.

ProLogis is the best positioned industrial REIT in the current scenario. Its recent efforts to de-leverage further make us confident of maintaining our Buy rating and a favorable outlook for the company.

The report by the Financial Times on Sunday also said that French marketing company Publicis Groupe SA could emerge as a possible bidder.

The FT stated that an analyst has valued the agency at $600 million to $700 million based on last-year's revenue of $400 million and profit margins for similar businesses of 12% to 13%.

Microsoft acquired Razorfish in 2007 as part of its $6 billion takeover of aQuantive.

The Seattle-based digital agency has more than 2,000 employees and boasts of a client list, which includes AT&T Inc. (T), McDonald's Corp. (MCD) and NIKE Inc. (NKE).

MSFT, a Zacks #3 Rank ("Hold") stock, have gained nearly 2% on lower-than-usual volume of approximately 40 million, against the average daily volume of about 64.1 million.

Chicago, IL - June 19, 2009 - Zacks Equity Research highlights Allion Healthcare Inc. (ALLI) as the Bull of the Day and Embarq (EQ) the Bear of the Day. In addition, Zacks Equity Research provides analysis on EnCana (ECA), XTO Energy (XTO) and Chesapeake (CHK).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day:

Allion Healthcare Inc. (ALLI) is a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients. The company recently reported better-than-expected 1Q09 net income of $3.5M, or EPS of $0.13, compared with net income of $1.1M and EPS of $0.06 in 1Q08.

Organic growth in 1Q09 of the company's core Specialty HIV was 9% y/y, with the aggregate number of Specialty HIV prescriptions filled in 4Q08 tallying 265,455, an increase of 3.7% y/y.

We believe current initiatives, such as the partnering with large AIDS service organizations in Seattle, for example, bodes well for increased volume growth over the short term. We maintain our BUY rating at current levels.

Bear of the Day:

We maintain our Sell rating for Embarq (EQ), the fourth largest local telephone service provider in the U.S., as access line loss continues to erode traditional voice revenue, largely resulting in decreasing consolidated sales in the last quarter (below our expectations). Line losses have been accelerated with deactivations among business customers due to weak economic conditions.

EQ has received shareholder approval as well as the required state regulatory authorization for its consolidation with CenturyTel under an $11.6 billion merger deal (expected to close in 2Q 2009). We believe that the local phone business in North America, in particular service offered by regional carriers, has significant challenges ahead as consumers and business customers migrate to alternative solutions including VoIP, wireless and cable offerings.

Lower revenue forecasts for the second quarter of 2009 coupled with sustained access line losses support our thesis. We also believe pricing pressure and the need to invest further in broadband infrastructure may strain balance sheet conditions, considering EQ's limited liquidity and significant debt level.

Latest Posts on the Zacks Analyst Blog:

Another Natural Gas Build

The storage overhang in the U.S. natural gas market shows no sign of easing. With domestic production continuing to outpace recession-hit demand, despite the sharp retrenchment in the rig count, the commodity appears to be on track to exit the summer injection season with an all-time high storage build. Today's bearish report is expected to stall, if not altogether reverse, the emerging strength in natural gas prices over the last few days that pushed it above the $4 mark.

To play this natural gas outlook, we continue to rely primarily on select E&P players such as EnCana (ECA), XTO Energy (XTO) and Chesapeake (CHK) who have the bulk of this year's production hedged at attractive prices and have access to resource-rich assets can be profitably operated in the current low-price environment.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5508.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Organic growth in 1Q09 of the company's core Specialty HIV was 9% y/y, with the aggregate number of Specialty HIV prescriptions filled in 4Q08 tallying 265,455, an increase of 3.7% y/y.

We believe current initiatives, such as the partnering with large AIDS service organizations in Seattle, for example, bodes well for increased volume growth over the short term. We maintain our BUY rating at current levels.Zacks Investment Research

Starbucks Corp. (SBUX) said it would recall about 530,000 coffee grinders sold in the last 7 years after receiving complaints from users who suffered unexpected injuries while trying to clean the machines.

"Consumers should immediately stop using the coffee grinders," the Seattle-based company said on Tuesday referring to the Starbucks Barista Blade Grinder and Seattle's Best Coffee Blade Grinder. Both grinders were made by a Chinese firm and sold by Starbucks between March 2002 and March 2009.

Separately, the Wall Street Journal reported that Starbucks was mulling a change in the way it grinds and brews coffee in order to make the "Starbucks experience" more attractive amid the recession.

Shares of the company fell more than 1% to $13.88 at noon on the NASDAQ.

Green Mountain Coffee Roasters is a growth company in the premium coffee and tea industry. Management is implementing a growth strategy based on a multi-channel geographic penetration business model. The company is expanding geographically and by adding new relationships.

Having generated 24 consecutive quarters of double-digit sales growth and twelve consecutive quarters with growth in excess of 25%, the stock is fairly valued at a premium P/E. The Hold rating is maintained due to high valuation and rising input costs.

Read the full analyst report on GMCR.

Read the full analyst report on PEET.

The company witnessed orders of more than 6.3 million items on its peak day, Dec. 15, which came to 72.9 items ordered per second. On that day, the Seattle-based company had shipped over 5.6 million units.

Amazon is a Zacks #4 Rank ("Sell") company. Shares of the company are currently up by less than 1%.

As a result, the chief investment officer at Seattle-based Empirical Wealth Management says that the high net-worth and institutional clients he works with aren't ready to panic yet.  

But he credits such realistic expectations to not only this year's educational push. Smith explains that he has been sounding a similar theme when markets were running strong from 2003 through late last year. The difference, he says, is that during bull markets the message has been to not chase asset classes that are performing well. 

Now, conditions are different. But the veteran advisor and portfolio managers says keeping a level head and remaining unemotional as market volatility remains high is as important as ever. Through good times and bad, he and his co-managers at Empirical emphasize that they stick to the same process of monitoring asset class correlations and watching trends in global market capitalization sizes.

And with most segments of equities pummeled this year, Smith believes that investors who've been disciplined about rebalancing their portfolios according to a long-term asset allocation plan can find plenty of good buying opportunities right now.

"The valuations right now in some areas of the market are very reasonable," said Smith. "Earnings could drop and valuations could change. But we're encouraging our long-term orients clients, especially the younger ones, to use these current market conditions to raise their stock allocations back to proper levels."

In fact, Smith says he has been scrambling to come up with extra money to put into stock funds for the portfolios of his daughters.

"Even for investors with shorter investment horizons, conditions right now offer a good buying opportunity in stocks," he said. "We're not telling older investors closer to retirement to go overboard and load-up on stock funds. But unless their circumstances and goals have changed, we think it's a good time for people to rebalance portfolios at attractive valuations."  

The firm's average allocation for his 500-plus clients is around 60% equities right now, says Smith. He prefers exchange-traded funds and passively managed portfolios from Dimensional Fund Advisors. A typical investor at Empirical might have 35% to U.S. large-cap funds. That's down from about 45% a few years ago.

In large blend categories, Smith likes the Vanguard Large Cap ETF (NYSE: VV).  He also tilts to the DFA U.S. Large Cap Value Fund (DFLVX).

The advisor targets another 20% to U.S. small-cap funds, which is relatively consistent with allocations of past years. That's divided across micro-caps, small-cap blend funds and small-cap value funds. Smith uses the iShares Russell Microcap Index (NYSE: IWC) and the Vanguard Small Cap Value ETF (NYSE: VBR) to fill those shoes. Smith also likes to include the Vanguard Small Cap ETF (NYSE: VB) and the DFA U.S. Small Cap Fund (DFSTX).

Some 25% of client stock assets now go into developed international markets. "In 2003, it started at around 16% and gradually has been bumped up," said Smith.

He uses four different funds in those areas. One of this is the Vanguard Europe Pacific ETF (NYSE: VEA) for large-blend international markets. The advisement firm mixes that with the DFA International Value Fund (DFIVX). For exposure to smaller foreign stocks, it's implementing in portfolios the DFA International Small Company Fund (DFISX) and the DFA International Small Cap Value Fund (DISVX).

In emerging markets, Smith will add about 10% of a typical client's stock assets into the DFA Emerging Markets Core Equity Fund (DFCEX). He also likes the Vanguard Emerging Markets Stock ETF (NYSE: VWO) for some portfolios.

"In early 2005, we started bumping up emerging markets allocations from around 4%," said Smith. "But emerging markets got up to about 12% of world markets based on capitalization levels at the beginning of this year. The year before it was close to 7%."

He added:  "We'll be evaluating that asset class again at year-end to see if it needs more adjusting based on global capitalization rates, correlations and valuations."

Smith is also putting his clients into the Northern Global Rest Estate Index Fund (NGREX). On average, client portfolios will have about 5% of its stock assets in that fund, according to Smith.

"It's just a straight index mutual fund," he added. "It came out about two years ago and was the first passively managed index fund that provided exposure to global REITs. It holds both U.S. and international real estate companies."

Finally on the equity side, Smith puts about 5% of an average client's assets into the iShares S&P GSCI Commodity-Indexed Trust (NYSE: GSG). "We like the exchange-traded notes in the commodities area," he said. "But until there's a ruling that changes the tax structure of commodities ETNs, we're sticking to the ETFs. And we also don't want to take on the credit risks with ETNs right now."

Empirical is rebalancing client assets into both stocks and commodities now. "But we're not big fans of buying into big pools of gold or metals. We don't focus on any one sector - we want exposure to a broad range of commodities," said Smith.

And the GSG's index weights commodities based on global production, he adds, "which is the most straight-forward and pure weighting methodology among commodities ETFs and ETNs."

Empirical rebalances portfolios based on a banding system. If an asset class shifts anywhere from 10% to 25% off its target allocation, then Smith and his team will consider making changes. Each asset class and fund is given different bands within a portfolio, he says.

"We're not market timers. But we review valuations for every asset class. So we do make adjustments, but it's not based on macroeconomics. It's based on changing correlations and valuations of different asset classes over longer periods of time," said Smith.

For bonds, Empirical focuses on constructing portfolios that are as non-correlated to stocks with as little risk as possible. "We keep it very simple using shorter-term durations and very high-quality funds," said Smith.

Empirical has four basic ETFs it includes in client portfolios. Those include the iShares Lehman 1-3 Year Treasury Bond Index (NYSE: SHY) and the iShares 3-7 Year treasury Bond Index (NYSE: IEI). The other two are the iShares 1-3 Year Credit Bond Index (NYSE: CSJ) and the iShares TIPS Bond Index (NYSE: TIP).

The firm's investment policy committee has just changed allocations within fixed-income because of narrowing spreads between TIPs and nominal Treasuries, says Smith.

It's now allocating about 30% into TIP, up from 20% a month ago. Targets for the other three are: SHY (20%); IEI (15%) and CSJ (35%).

"We want the average duration of portfolios to be around five years or less. If you have a greater number of longer-termed bonds in a portfolio, correlations with stocks go up. And the longer the maturity of bonds, the greater the interest rate risks. So we find that five years or less poses the best risk-reward profile," said Smith.

-- This article was submitted by IndexUniverse.com's Murray Coleman. 

First comes word that Hank Paulson rewrote tax law without Congress’s say-so, giving the banks a $140 billion tax windfall.  Now one could argue the tax law Paulson circumvented was a dumb idea, but even mainstream analysts who don’t fuss over the plain language of the Constitution say Treasury overstepped its bounds here.  I hope conservatives who hailed the “unitary executive” philosophy of Team Bush might be rethinking things by now… but I doubt it.

Meanwhile, Paulson and Ben Bernanke have gone back on their promise to disclose just who’s…

This from Taipan Daily:

Mark my words. It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking.

— Vice–President-Elect Joe Biden

Just a few weeks ago, Vice–President-elect Joe Biden (back when he was plain old Senator Joe Biden) promised the world that Barack Obama will be “tested” by America’s…

Pop quiz: The biggest company in the world? Nope, not Exxon Mobil, not today anyway. Would you believe…

In European trading this morning, shares of Volkswagen AG leapt 93% when word leaked that Porsche would be upping its stake from 49% to 75% — a controlling stake of the company. Buyers rushed in, short sellers were squeezed (big-time) and,…

Boeing’s shares soared $6.55 each, or 15.5%, to close at $48.91. They are still down 50% from their 12-month high of $98.71 and are down 45% for the year.

It was the longest strike in 13 years: The union walked out for 28 days in 2005 and 69 days in 1995.

Both sides claimed victory this time around.The union said that it “won the battle and made some significant gains,” while Boeing claimed it had “retained the flexibility necessary” to manage its business, Reuters reported.

Saturday will be the…

The industry received a boost when clean energy tax credits were added to the $700 bailout bill to help its passage from Congress. But fears of falling demand and oversupply have weighed on solar stocks. The Claymore/MAC Global Solar Index ETF (NYSE:TAN) fell 35% in the first eight trading days of October.

William Patalon III, however, says new mapping technology and advances that have made solar power more eco-friendly will boost solar stocks in the long run.

This from Money Morning:

The owners of homes and businesses in 25 US cities will soon be able to use a free website to determine their rooftop’s solar-energy potential – thanks to a new specialized mapping program that has the backing of the US Department of Energy.

Engineering giant CH2M Hill Cos. Ltd., an employee-owned firm with about $5 billion in annual revenue, has received a “small-but-noteworthy” contract of $6 million under the U.S. Solar America Initiative to provide raw data on solar-power potential, MarketWatch reported.

The contract will pay the expansion of the city of San Francisco’s recently posted solar energy map. It will use advanced 3-D modeling and aerial imagery and will be available for public access through a special web portal.

Punching an address into the city’s search engine pulls up data on the estimated amount of solar photovoltaic energy that could be installed on a specific roof. Additional available data includes the potential electricity-cost reduction and the potential reduction in dioxide/greenhouse gases, the company said.

The website also provides information on installing a photovoltaic system, including contact information for local solar installers.

David Herrmann, CH2M Hill’s director of client solutions, said the mapping program could potentially replace the current method of assessing solar energy potential.

“Right now, to get a solar assessment on a roof, you have to call up the solar installer, they bring their ladder, a guy wanders around on your roof, and two or three weeks later you get a report,” Herrmann told MarketWatch. “With this technology, you could do it accurately and quickly without having to roll a truck.”

Herrmann said the company’s solar maps use a format from Google's (NASDAQ:GOOG) Google Maps to display the data, but that CH2M Hill collects the images through its own proprietary process with Esri Inc. – A Redlands, Calif.-based company that’s recognized as a leader in geographic information systems (GIS) also supplying technology for the effort.

The solar map is also compatible with the Microsoft (NYSE:MSFT) Virtual Earth display, he said.

Herrmann said the Internet-mapping business remains healthy, with companies routinely paying for airplane flyovers to provide panoramic shots of streets and buildings all across the United States.

The 25 cities for which this service will be available will include: Denver, Houston, Philadelphia, San Jose, Calif.; Santa Rosa, Calif.; Seattle; Ann Arbor, Mich.; Austin, Tex.; Berkeley, Calif.; Boston, New Orleans, New York City and Tucson, Ariz.

Also, advances in technology have made solar cell production even more eco-friendly.

A recent study by the Brookhaven National Laboratory in Upton, N.Y., found that for each unit of energy produced by solar cells, the pollution that’s emitted during the cells’ manufacture is only 2% to 11% the amount produced by power plants in the United States and Europe.

In fact, newly developed solar cells can "pay back" the energy required for their production in just one to three years. And improvements in manufacturing efficiency could reduce emissions from solar power by another 50% in five to 10 years, according to a recent report by Money Morning.

There have been tremendous advances in the production and efficiency of solar technologies.

And those advances couldn’t have come at a better time. Political support for the industry is at an all-time high as oil prices and environmental awareness both continue to rise.

The Englewood, Colo.-based CH2M Hill has 23,000 employees and ranked 54 on Fortune magazine’s 11th annual “100 Best Companies to Work For” list, a ranking that was published in late January. It’s the third time the company has ranked among those top-tier companies. CH2M Hill has also been recognized as a “Most Admired Company” by Fortune for the past five years.

CH2M HILL has been repeatedly recognized for its competitive compensation-and-benefits packages, employee ownership, and reputation for landing challenging projects, some the most recent include:

• Program management for the seven-year, $5 billion expansion of the Panama Canal.

• Overseeing the design and construction of the venues and infrastructure for the London 2012 Olympic and Paralympic games.

• The engineering and construction of the Xcel Energy Inc.’s (XEL) 580-megawatt gas-fired High Bridge Power Plant near St. Paul, Minn.

• Providing program management consulting services for the $2 billion improvement program for India’s Mumbai airport.

• Engineering services for the Southern Seas Desalination Plant in Perth, Australia, which will use “green” energy to supply 20% of that city’s water needs.
• Managing a $10 billion military-base-relocation program for the U.S. and South Korean governments

Alternative Energy Update: Can Your Rooftop Lower Your Electricity Bill?

The S&P/Case-Shiller Home Price Indexes' 10-City Composite and 20-City Composite reached new record annual declines of 17.5% and 16.3%, respectively, through the end of July, the most recent period tracked by S&P.

The 10-City Composite Index declined at a record level for the 10^th consecutive month. Taken together, these declines far surpass the record decline of 6.3% in a similar market trough between 1990-1992.

The news is not all bad, however. Overall declines have actually slowed in home prices in the most recent three-month period.

Cumulative home prices fell 2.2% for the three months ended July, whereas for the previous two consecutive three-month periods, the cumulative home price fall was more than triple that level, between 6-6.5%.

While the slowdown in home price declines is notable across metro areas, it does not necessarily mean a bottom has been reached in the market, and some metro markets continue to post outsized declines, S&P indicated.

All 20 major metro markets are still in negative territory year-over-year, and Las Vegas (-29.9%) and Phoenix (-29.3) had annual declines nearing 30%. The Sun Belt as a whole continued to be in the dark, with its seven major metro markets all posting declines of at least 20%. Don't make a bet on Vegas' home market, either: It continues to be the big loser at the table in terms of home price declines, followed by Phoenix and Miami (-28.2%).

Other major metro markets seem on the verge of a rebound, but S&P remains cautious on outlook.

Atlanta, Dallas, Minneapolis and Tampa all showed improvements in home pricing with the new monthly and annual data, but S&P indicated the markets remained too near recent lows to be demonstrating clear evidence of a turning tide. Atlanta, Boston, Dallas, Denver and Minneapolis all had positive returns for the past three months through the end of July. The smallest dips for the annual period through July were Charlotte (-1.8); Dallas (-2.5%); and Denver (-4.7%)

In the same 2007 annual period, the S&P/Case-Shiller Home Price Indexes fell 4.5% and 3.9%, respectively. The only five metropolitan areas last July to show positive one-year returns were Atlanta, Charlotte, Dallas, Portland and Seattle (see story here).