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You're at a fruit market. But, instead of just being able to buy apples at this fruit market, you can also sell fruit.
You're not a farmer, so you come to the market to buy some apples and you see two fruit stands. Fruit Stand A on the left
is buying and selling apples at 50 cents apiece. However, Fruit Stand B on the right is buying and selling apples at 53 cents
apiece. People are buying and selling apples at these two stands all the time, and the price at a stand could change at any
moment. But, while you're there, apples are 50 cents and 53 cents, respectively.
You're a smart person, and you quickly
realize that you can buy apples from Stand A and then sell them across the street to Stand B and make a 3-cent profit. But
you have to do it now; you can't wait. So you buy all the apples at Stand A and then run to sell them all to Stand B.
Congratulations.
You've committed fruit-stand arbitrage.
Arbitrage is exactly that: the selling of the same item between two different
markets to make a profit off the mathematical differences in price. However, it's not apples that are traded--the goods in
question are usually stocks, currencies and other securities. Arbitrage happens when you get a stock, usually a common one
like General Electric that's traded on multiple markets (Japan, Hong Kong, U.S., etc¿). The stock is usually worth within
fractions of a penny the same on each of those markets. However, there are often some minor variations.
People who
participate in arbitrage take advantage of these variations--and make a ton of money doing it. As seen in the fruit stand
example, you can make a "riskless profit" from buying and selling apples between different markets.
There are some
big hedge funds that make almost all their money off arbitrage. But, despite this simple example, arbitrage is mathematically
complex--and involves a good portion of risk if you don't know what you're doing. You probably won't be able to participate
in arbitrage directly, but you can always invest in a mutual fund that does.
Home / Markets / Industries / Energy
Wednesday, May 14, 2008
Zacks Buy List Highlights: Panera Bread Company, Murphy Oil Corp., Textainer Group Holdings Ltd. and Superior Essex
Comtex
CHICAGO, May 14, 2008 (BUSINESS WIRE) ----Zacks.com releases the latest list of Zacks Rank Buy Stocks. Every day on Zacks.com, four stock picks are made based on criteria for the each of the four main styles of investing: Aggressive Growth, Growth & Income, Momentum and Value. The four Zacks Rank Buy stocks highlighted today are Panera Bread Company (Nasdaq: PNRA), Murphy Oil Corp. (NYSE: MUR), Textainer Group Holdings Ltd. (NYSE: TGH) and Superior Essex, Inc. (Nasdaq: SPSX).
Stocks ranked #1 (Strong Buy) by Zacks have produced an average annual return of +32.2% since inception in 1988. During the 2000-2002 bear market, Zacks #1 Rank stocks gained 43.8% while the S&P 500 tumbled -37.6%. To see the full Zacks #1 Rank (Strong Buy) List, or the rank for any other stock, visit: http://at.zacks.com/?id=88
Here is a synopsis of today's Zacks Rank Buy Stocks:
Aggressive Growth - Panera Bread Company (Nasdaq: PNRA)
Panera Bread's yeast isn't the only thing rising these days. The stock has been performing well since its first-quarter results. Same-store sales are also growing nicely. Over the past month, this year's earnings estimates have increased eight cents to $2.10 per share. Ten of the 12 covering analysts have raised their forecast.
Zacks Guide to Aggressive Growth Investing (free!): http://at.zacks.com/?id=4309
Growth & Income - Murphy Oil Corp. (NYSE: MUR)
Murphy Oil Corp., a Zacks #1 Rank (Strong Buy) company, recently posted a robust first quarter that included earnings per share of $2.14, which more than tripled the previous year's 58 cents and eclipsed the consensus estimate by 15%. Wall Street has been bullish on MUR's full-year earnings estimates. Six out of 11 covering analysts upped year 2008 projections to $7.71 per share from last month's $7.29. Murphy's ROE of 23% almost doubles the industry average of 12%.
Zacks Guide to Growth & Income Investing (free!): http://at.zacks.com/?id=4310
Momentum - Textainer Group Holdings Ltd. (NYSE: TGH)
Textainer Group Holdings Ltd. shares have been in rally formation for the last few months after bottoming out in early February just below the $11 mark. Much of the recent surge comes on the company's solid first-quarter results, reported on May 5, in which revenue was up 22% from the same period last year. The container industry is booming right now because shippers have been suffering from a sever shortage in light of increased global trade.
Zacks Guide to Momentum Investing (free!): http://at.zacks.com/?id=4311
Value - Superior Essex, Inc. (Nasdaq: SPSX)
Superior Essex is optimistic about the second quarter even as the North American market remains slow. The global wire and cable product manufacturer has surprised on estimates the last four quarters on average of 25.97%. Despite the stock trading near 52 week highs, the company has a 2008 P/E of only 10.78.
Zacks Guide to Value Investing (free!): http://at.zacks.com/?id=4312
The free special report, "Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions," provides an insightful background about this wealth-building tool. Download your free copy of the report now to prosper in the years to come by visiting http://at.zacks.com/?id=93.
About the Zacks Rank
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +32.2%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 129% annually (+5.3% vs. +12.1%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of Zacks Rank Buy stocks and highlights those stocks poised to outperform the market. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=90.
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 http://at.zacks.com/?id=91
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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.
SOURCE: Zacks.com
Zacks.com Aggressive Growth Stocks: Contact: Roopak Chakravarty Phone: 312-265-9188 or Growth & Income Stocks: Contact: Alex Kolb Phone: 312-265-9149 or Momentum Stocks: Contact: Michael Vodicka Phone: 312-265-9226 or Value Stocks: Contact: Tracey Ryniec Phone: 312-265-9232 Email: pr@zacks.com Visit: www.zacks.com
Copyright Business Wire 2008
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