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WALL STREET, CALIFORNIA | Portfolio Strategies

For Investors With an Eye on Growth, New Chart Offers View

May 18, 1999|JOSH FRIEDMAN and WALTER HAMILTON

When growth-oriented investors assess whether to buy a stock, they look for several factors.

Fast-rising earnings, an already strong share price and positive Wall Street sentiment often are critical to a stock's chances of heading higher--at least in the short term.

To identify stocks with those traits, The Times today introduces its Power Ratings, which screen stocks listed on the major U.S. markets for strength--or weakness--in each of those categories.

Using data provided by Zacks Investment Research, the accompanying chart gives equal weighting to:

* The percentage change in the last 12 weeks in analysts' consensus earnings-per-share estimates for the current fiscal year. This indicates companies whose fundamentals could be noticeably improving or worsening.

* The percentage change in share price during the last 12 weeks. This shows whether investors are clamoring to buy the stocks--or to dispose of them.

* Analysts' consensus rating on the stocks (1 equals "strong buy," while 5 equals "strong sell"). This shows how Wall Street analysts, whose opinions can sway short-term stock performance, view the companies.

It's important to note that stocks fueled by earnings and price momentum can be volatile, and, indeed, many of those on the Top 50 Stocks list are Internet-related. In some cases, the prices of these stocks are extended--meaning they've risen very high in a brief time--and carry hefty price-to-earnings ratios.

Stocks with lofty P/Es also could be risky in the short-term given the disquieting inflation news Friday and concerns that the Federal Reserve might raise interest rates in the next few months. Rising rates threaten to depress future earnings, thus making investors less willing to pay up for those earnings.

Of course, investors should check out a variety of factors, such as quality of management and prospects for its industry, before buying any stock. Indeed, The Times is not recommending the purchase or sale of any stock on the lists.

It seems fitting that Knight/Trimark Group heads the list of the Top 50 stocks. The company makes markets in Nasdaq and New York Stock Exchange stocks. That is, it stands ready to buy and sell Nasdaq and NYSE stocks from investors seeking to trade them.

Knight/Trimark is partially owned by major online brokerage firms, and much of its business comes from the booming number of individual-investor trades it executes on behalf of online brokers.

Knight/Trimark's stock price has more than quadrupled in the last 2 1/2 months to $73.31, as of Monday's close. At the bottom of the market downturn in October, it was at a split-adjusted $2.25. Profit surged 78% to $50.8 million in 1998, and revenue improved 57%. In this year's first quarter, profit bolted 344% and sales jumped 188%.

First Sierra Financial is a Houston-based company that leases equipment ranging from computers to medical equipment. Its stock has tripled in the last six weeks.

The stock popped April 8 after the company told analysts that first-quarter earnings would "significantly exceed" analyst projections because lease originations were topping estimates by 20%.

On April 23, the company said it broke even in the quarter on a per-share basis. Analysts had expected a 16-cent loss. After earning $10.5 million in 1997, the company posted a net loss of $5.9 million last year, and cut 22% of its work force.

First Sierra announced plans in April to create an Internet-based bank that will cater to small businesses.

Go2Net runs a network of Web sites, including the popular Silicon Investor chat site. It has been rapidly gobbling up Web sites. On Friday, for example, the company announced plans to acquire IQC.com, an Industry-based Web site providing stock charts and company data.

Apria Healthcare Group shares began rising in late March after the provider of home health-care services said first-quarter profit would be at least 25 cents a share, far better than the 4 cents analysts had projected at the time. A month later, it reported a 30-cent profit.

The company has cut costs amid declining reimbursements from the government and insurers. Nevertheless, Apria has lost a total of $480.5 million in the last two years, and its stock is less than half its June 1995 high of $41.63.

Visx Inc. has ridden the trend in which Americans are ditching eyeglasses in favor of laser surgeries that can correct their vision. Visx makes the lasers used by eye doctors in nearly 75% of vision-correction procedures in the U.S. Profit jumped 120% in the first quarter, as revenue leaped 122%.

Triton Energy explores for oil and natural gas in Colombia and the Gulf of Thailand. Its shares, which sank 73% last year, have bounced along with other energy companies as oil prices have recovered somewhat.

Last year, Triton looked to sell itself, but couldn't find a buyer. Leveraged buyout firm Hicks, Muse, Tate & Furst invested $350 million, and Triton is considering acquiring other energy firms.

*

Times staff writers Josh Friedman and Walter Hamilton can be reached at josh.friedman@latimes.com and walter.hamilton@latimes.com.

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