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Page 1: Contents · Tri Pointe Homes (TPH) Tri Pointe Homes (TPH) is a stock that has the potential to double. I like this play for several reasons, but most of all the low valuation for
Page 2: Contents · Tri Pointe Homes (TPH) Tri Pointe Homes (TPH) is a stock that has the potential to double. I like this play for several reasons, but most of all the low valuation for

25 Stocks to Double

ContentsOverview 3

Tri Pointe Homes (TPH) 4

Affymetrix (AFFX) 7

Limelight Networks (LLNW) 10

Allison Transmission (ALSN) 13

Intel Corp. (INTC) 18

Other Zacks Resources 21

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35 Stocks to Double

OverviewThank you for your interest in Zacks and the 5 Stocks to Double report. This report will give you an idea of the enormous resources available on Zacks.com. I invite you to visit the site and get familiar with the Zacks Rank, our stock picking frame-work that has an impressive track record of generating market-beating returns year after year.

Each of the 5 stocks in this report was hand-picked by one of our stock strategists, who explain their rationale in the included stock write-ups. Clearly, this report was not written for the risk-adverse or conservative investor. Rather, these stocks are for the aggressive investor looking to add home-run potential to his or her port-folio. It would be prudent to devote no more than a small portion of your overall portfolio to these stocks.

That said, we hardly threw darts at a board to arrive at these choices. All of the stocks have catalysts that we think could fuel strong gains over the coming year. We sifted through stocks that met Zacks Rank criteria and then chose the crème de la crème. Each of the five stocks has unique qualities that make it a candidate for this report. And they are all from different sectors, offering a level of diversifi-cation even in this small sample.

Most of the stocks in this report are currently flying under the radar of most Wall Street analysts and traders, which provides a good opportunity to get in on the ground floor. The market is littered with these kinds of stocks, but only the ones with positive catalysts on the horizon burst onto the scene with monstrous gains. We made sure that we could identify specific factors that would bring these stocks out from obscurity and onto the lists of top performing stocks.

We are confident that you can realize enormous gains with these 5 stocks. Leave the singles and doubles for other portfolios; we are swinging for the fences on this one!

Best regards,

Sheraz Mian

Page 4: Contents · Tri Pointe Homes (TPH) Tri Pointe Homes (TPH) is a stock that has the potential to double. I like this play for several reasons, but most of all the low valuation for

45 Stocks to Double

Tri Pointe Homes (TPH) Tri Pointe Homes (TPH) is a stock that has the potential to double. I like this play for several reasons, but most of all the low valuation for a stock that should see some solid growth this year. There is some pent up demand for new homes, as home buyers are likely looking at the last summer of rock bottom interest rates. Those rates have been low for some time now, but there is a line of thinking that says around this time of next year rates will be on the move up. Put those two ideas together and you have the potential for a stock to double in price over the longer term.

Company DescriptionTri Pointe Homes designs, constructs, and sells single-family homes. The company also acquires and develops land. It operates a portfolio of six brands across eight states, including Maracay Homes in Arizona, Pardee Homes in California and Nevada, Quadrant Homes in Washington, Trendmaker Homes in Texas, TRI Pointe Homes in California and Colorado, and Winchester homes in Maryland and Virginia. The company is based in Irvine, California. TPH operates as a subsidiary of Weyerhaeuser NR Company.

Earnings HistoryTPH has a very strong earnings history beating the Zacks Consensus Estimate for all eight reports on record. The most recent report was on March 3, with the company topping estimates by $0.03. There was some not so good news on this report as the company missed the topline by $18M for its first negative revenue surprise.

The quarter prior was reported in November of 2014. The company posted EPS of $0.22, topping the Zacks Consensus Estimate by $0.20 for a 1000% positive earnings surprise. The company also posted a very strong surprise on the top line as well, coming in with $478M in revenues, roughly $34M ahead of the Zacks Consensus Estimate.

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Guidance Range LoweredFollowing the most recent earnings report, the company lowered the range of expected earnings by about $0.10 and that caused investors to re-price the stock by about 5% to the downside. It should be noted that the lower range for guid-ance is still within the broader Wall Street view for earnings in 2015.

Estimates The 2015 Zacks Consensus Estimate has held steady just a day or so after the most recent earnings report at $1.27. The 2016 number, which is still relatively new is sitting at $1.39. That implies forward earnings growth of nearly 10%.

Macro Background Interest rates have remained low for some time now. More recently the market is looking to the Fed to see when they will move interest rates higher. Recent reports suggest an extremely low likelihood of a rate increase in June and only a slightly higher chance for the September meeting.

The low interest rate environment has been a strong tailwind for the home build-ing industry. The cheap money has allowed consumers to obtain the “American Dream” for some time, but with signals of the potential rate increases might push even more home buyers into the market to lock in lower rates.

Valuation TPH has a great valuation for a growth company. A trailing PE of 16.7x is just slightly higher than the 16.3x industry average, but more importantly the forward PE of 12x is below that of the 13x industry average. The price to book of 1.7x is also show-ing the stock trading at a discount to 1.8x industry average. Price to sales is a little skewed here and has TPH at 5x while the industry typically trades around 1-2x.

To get a better grasp as to why this stock trades at such a low valuation, I can only point to the net margin of 2.9% for TPH and the fact that the industry average is 4.2%. For 2015, TPH is expected to see revenue grow 83%, well ahead of the 19% growth the industry is expecting. Moreover, TPH is slated to see EPS grow 49%, while the rest of the industry is looking at earnings growth of 25%.

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Chart The chart shows how TPH has beaten the Zacks Consensus Estimate in every quar-ter the company has been public and now that earnings estimates show signs of turning higher, there is a good chance that this stock will double over time.

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75 Stocks to Double

Affymetrix (AFFX) When looking for a stock to double there are many things to consider. What indus-try should you look at? What does the earnings picture look like? How has the stock done recently? Using the power of the Zacks Industry Rank, Zacks Rank and some basic technical analysis you can help tip the odds in your favor.

But it’s more than that. You’ve got to find a company that’s in a growth indus-try with strong revenues that is small enough that doubling isn’t farfetched. Affymetrix (AFFX) invented the world’s first high-density microarray and began selling the first commercial microarray. Since then, Affymetrix GeneChip technol-ogy has become the industry standard in molecular biology research. Their tech-nology is used by the world’s top pharmaceutical, diagnostic and biotechnology companies as well as leading academic, government, and not-for-profit research institutes.

The company has been making strides in three key areas; Translational medicine, molecular diagnostics and applied sciences. The cutting-edge discipline of trans-lational medicine involves the identification of biomarkers that provide the clini-cian tools for the diagnosis, prognosis and optimized treatment of a patient. The company’s Axiom Genotyping Solution was selected as the platform of choice for UK Biobank and the Million Veteran Program in the US.

A second example of how the company is getting involved in this field is their OncoScan FFPE Assay Kit, which enables the study of whole-genome copy number profiling in solid tumors. Changes in the copy number play a significant role in many cancers. Affymetrix technologies help researchers understand disease states and help to develop new diagnostic approaches and therapies.

In January 2014, the FDA cleared the company’s CytoScan Dx Assay. This test helps to diagnose prenatal development delays. Currently the kit is being evaluated at many leading cancer centers.

AFFX is a Zacks Rank #1 (Strong Buy) and is coming off a strong earnings report. Total revenue for FY2014 came in at $349 million, up from $330.4 million in 2013. Total revenue grew by 8.9% after adjusting for a one-time license payment of $5.3 million in 2013 and the sale of its Anatrace business. Total GAAP gross margin was 59% as compared to 55% in 2013. Growing margins and boosts in revenue helped

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AFFX beat consensus by 2 cents per share for Q4 at 9 cents. Over the last four quarter, AFFX has beat by an average of 3 cents.

This prompted analysts to jack up their earnings estimates for the current year and next year. Four analysts increased estimates for the current year while two raised their numbers for next year. The bullish attitude has helped push the Zacks Consensus Estimate up from 27 cents to 30 cents for the current year and 29 cents up to 35 cents for next year.

The stock has been rallying since hitting a bottom at $7 during the lows of October 2014. In late October AFFX popped above the 21 day moving average shortly after the commodity channel index flashed a “Buy” signal by crossing over the zero line after being below -100. That initial rally took the stock to $10 before it came back down on a quick retrace.

That retracement found itself coming down nearly to the 61.8% at $8.28 in late November. After jumping above the 21 day on December 17th AFFX hasn’t looked back. Breaking through previous resistance at $10, the stock pushed higher through 52-week highs and now sits at $11.83. It’s firmly above a positively sloped 21 day here and the commodity channel index is slightly overbought at 89.22. More cautious investors can use the swing low at $11.25 as an area to add more exposure or the top end of a stop-loss range of the stock where it trades now.

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Chart courtesy of QuoteMedia Quotestream Professional

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105 Stocks to Double

Limelight Networks (LLNW) The consistent buzzword for internet companies has been content, content, content. The more new content a web page has, the more eyes it will draw to the site, and that also translates into more return visitors as well. But how do you deliver high performance and high availability content to end-users?

A content delivery network (CDN) enables the delivery for a vast array of content including; live streaming media, social networks, downloadable objects, appli-cations, on-demand streaming media, and web objects. Therefore, a content provider will enlist the help of CDN operators to deliver to end-users their content. This is done because CDN’s provide better availability and performance, and because the CDN will offload the traffic from the providers infrastructure result-ing in cost savings for the content provider.

One of the world’s leading providers in content delivery is Limelight Networks (LLNW) which holds a Zacks Rank #1 (Strong Buy) at the time of this writing. Limelight is a global leader in digital content delivery that empowers customers to better engage digital audiences by enabling them to manage and deliver digital content on any device anywhere in the world. Limelight has developed from the ground up, the world’s largest and most reliable private content delivery network (CDN).

This Tempe, Arizona based company was founded in 2001, and has a very impres-sive list of customers: DirecTV, MTV, Rhapsody, Allianz Asset Management, Columbia University, Western Union, Cigna, McGraw Hill, Loreal, Kodak, Nintendo, Lionsgate, and Deutsche Bank to name a few. Further, Limelight has a history of delivering even the biggest events; including presidential inaugurations, sporting events, gaming releases, and much more.

Positive TractionIn their most recent earnings announcement, Limelight’s CDN revenue grew just under 20% year over year (ex-Netflix), and virtual address space (VAS) increased 7% after several quarters of flatness. Further, management increased 2015 reve-nue guidance from the consensus of $154 million to a range of $156-$164 million.

After the most recent earnings announcement in early February, CEO Robert

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Lento stated, “Our focus on revenue capture, operational efficiency, a customer centric engagement model, and employee retention is having a definite impact, and this is reflected in our improving performance. As reflected in our guidance, we expect to build on this momentum and further advance our operational and financial profile. Our industry is healthy and our position is advancing.”

It has been mentioned that Limelight is a potential strategic asset for a few possi-ble suitors; first, a telecommunications company may want to purchase Limelight instead of building their own CDN system, or a number of other peripheral commu-nication companies which would benefit from the acquisition of Limelight due to their low share price, and highly functional infrastructure capabilities.

Finally, Limelight Networks repurchased 0.8 million shares in Q4 2014 for about $2 million, and has $10.3 million remaining under its authorized repurchase program. Like most every share repurchase program, this is a great usage of cash, and improves shareholder value.

Increasing EstimatesLimelight has beaten the Zacks Consensus Earnings estimate the past 5 consecu-tive quarters, and has beaten the Zacks Consensus Revenue Estimate over the past 4 consecutive quarters. On average, the company has posted an average positive earnings surprise of 41.11% over the past four quarters. The most recent earnings announcement caused the Zacks Earnings Estimate for 2015 to go from -$0.32 to -$0.25, and improved the Zacks Earnings Estimate for 2016 from -$0.33 to -$0.23.

The table below shows the Price and Consensus estimates for 2015. As you can see estimates almost double the current price.

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The Bottom LineLimelight’s relatively new executive management team has shown positive trac-tion with their vision for the company going forward. This was reflected in the most recent earnings announcement, and 2015 guidance. As such management has stabilized the CDN business, future growth with the VAS segment, and new customer wins. With a world-class CDN system, and management’s focus on improving their delivery network through increased performance and network flexibility, Limelight is a stock to double in 2015.

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135 Stocks to Double

Allison Transmission (ALSN)While many investors might focus in on the Teslas of the world in the automo-tive market, component makers in the car world can actually be excellent choices too. This is particularly the case for Allison Transmission (ALSN) right now, as this commercial vehicle-focused company appears well poised for stock price growth in 2015.

Allison Transmission in FocusALSN is an Indianapolis-based designer and manufacturer of automatic transmis-sions that are primarily used for commercial and defense applications. Allison has become the premier brand in this market, providing the transmissions for every-thing from school buses and motorhomes, to fire trucks and Armored Personnel Carriers (APCs).

In fact, ALSN is pretty much the standard for a variety of medium and heavy duty vehicles and it has captured a near monopoly level of market share in many of its important business segments, as you can see in the chart below:

Growth Market on the ReboundThough while ALSN has an easily defensible position and consumers are willing to pay more for its high quality products, the commercial vehicle market hasn’t exactly been robust in recent years. However, as the economy has picked up steam in recent months, this important sector of the economy appears to be more promising as well.

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After all, in ALSN’s core markets, sales are below the 1999-2008 average, and far below that period’s best year. However, as the economy has rebounded from the lows of 2009, sales in these markets have surged too. In fact, ALSN expects solid, steady, growth in its key markets over the next few years and it looks to get back to the 1999-2008 average in short order.

While this is a promising trend, the real focus of ALSN investors should be on the international market. That is because automatic transmissions have not pene-trated into this space in the same way they have in the North American space, giving ALSN a huge opportunity.

From Allison’s research, just 5% of vehicles in the international market utilize auto-matic transmissions, compared to close to 80% in the U.S. And as these markets

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continue to industrialize—such as China—the growth opportunities will be enor-mous for ALSN, allowing the company to benefit from both the rebound in the domestic segment and surging demand in foreign locales.

But while the market slowly improves, ALSN hasn’t been sitting on its hands as it has been improving its margins and preparing the company for this cyclical come-back. ALSN actually has a higher EBITDA margin (approaching 35%) than many of its peers in the space, while margins have gone from 26.4% in 2008 to this 35 percent mark today.

So, not only is ALSN a leader by brand and market share, the company is also a margins monster that has great international expansion opportunities as well. This means that ALSN is clearly becoming more efficient and is well poised to take advantage of the strong cyclical trends that investors are seeing in this corner of the market now.

Earnings EstimatesAnd if these trends in the space weren’t enough, you should probably consider the recent earnings estimate revision story for ALSN. The company has become a favorite among analysts as estimates have been soaring for Allison Transmission as of late, suggesting that the company’s near term future is incredibly bright.

In fact, at time of writing, there wasn’t a single estimate lower in our consensus over the past 90 days. Instead, five estimates were higher for the current year in the past month, and 3 were higher in the same time period for the next year time frame.

But not only have analysts been in agreement about the stock, but they seem to have all recently reached a consensus that ALSN’s near term prospects are signifi-cantly better than they were just a few short months ago. That is why the current quarter (reporting in April) consensus has skyrocketed from 37 cents/share 30 days ago to 64 cents a share today, projecting a nearly 17% (yoy) growth rate now.

Full year and next year numbers have also surged in recent weeks, as the current year consensus has moved from $1.46/share 30 days ago to $2.71/share today, an increase of 85% in the short one month time frame. Meanwhile, next year’s figures have jumped from $1.62/share to $2.83/share in the past 30 days, a 74% increase, showcasing just how much analysts now believe in ALSN and their prospects over both the short and long term.

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And before you worry about the heightened expectations, consider ALSN’s stellar track record at earnings season. The company has crushed estimates in each of the last four quarters by an average of 80%, including a 116% beat in the year ending quarter. If the streak of earnings beats wasn’t impressive on its own, take a look at the chart below which shows how consistent ALSN is in earnings season:

The Bottom LineALSN currently has a Zacks Rank #1 (Strong Buy) and it isn’t difficult to see why this security has such an impressive rating. Earnings estimates have been soaring,

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the company remains fairly valued, and the industry it finds itself in is quite strong with great promise of growth in the coming years.

So if you are looking for a stock to double, definitely take a closer look at Allison Transmission. Expectations for earnings have nearly doubled in the past month or so, but the stock price hasn’t caught up yet suggesting that there might be a very short window (that is closing fast) to get in on this often overlooked, and poten-tially outperforming, stock.

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185 Stocks to Double

Intel Corp. (INTC)Intel doesn’t fit the traditional profile of a stock that will double over the follow-ing year. After all, you don’t expect $160 billion market cap players that are leaders in a big industry like semi-conductors to have that kind of gain. In fairness, I don’t expect the stock to exactly double, but I do expect Intel to be one of the stron-gest performers this year on the back of compelling product offerings in mobile, big data and cloud.

Going into 2015, Intel has raised its annual dividend payment by 7% to $0.96, an increase of $0.06, which will be effective in Q1 2015. The dividend hike showcases Intel’s strong cash flow prowess – they generated $20.4 billion in operating cash flow in 2014, with free cash flows (operating cash flows less capital expenditures) at $10.3 billion. The chart below shows how strong the cash flow position has been in the last few years:

We will discuss Intel’s growth prospects and emerging businesses, but please note that the reference to the company’s strong cash position is also a comment on its ability to return copious amounts to shareholders through a growing dividend and share buybacks, but also in R&D spending. As you can see in the chart below, the company has been spending a steadily growing share of its cash on share-holder returns.

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With respect to growth, revenue gains aren’t expected to exceed high single digits this year and next. But the company’s business mix is well positioned to generate many years of double-digit top-line growth over the next few years.

The outlook for the PC Client group still remains challenged, reflecting the diffi-cult global capex backdrop and the secular shift away from PCs into mobile. The PC group is still a dominant business within Intel’s business portfolio, accounting for almost 60% of its total revenues in 2104. We should keep in mind however that the PC group accounted for 75% of the company’s total revenues in 2009.

The Data Center group has been growing nicely lately, with the business now accounting for almost 28% of the firm’s total revenues from roughly 15% of the total in 2009. This business is expected to generate double-digit revenue growth over the next few years, as the chart below shows.

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Intel has done admirable advances in rectifying its earlier mis-steps on the mobile front. The proliferation in connected devices and the shift away of data to the cloud offers the best growth avenues for Intel. The company isn’t generating much earnings from its tablet and smartphone chip unit or its products for the Internet of Things (IoT) applications. But these businesses are expected to become meaningful growth contributors over time.

On its latest earnings call, the company raised its guidance for the year, with top-line growth expected in the mid- to high single digits. Mobile revenue is expected to be up year over year due to LTE modem. Revenue for the Data Center Group (DCG) is expected to increase 15% year over year. Internet of Things Group (IoT) revenues are expected to increase above the 18% rate in 2014.

Intel is also introducing new and innovative products throughout 2015. In a joint venture with Micron, Intel will introduce their first 3D NAND featuring 2x bits per die. Furthermore, Intel’s Mobile division plans on introducing the XMM 7360 LTE modem, Cherry Trail, and SoFIA LTE. Further, the 14nm Core products (i3, i5, i7) is currently on target for a full roll-out in the spring of 2015. Moreover, the Broadwell (14nm) Core M captured design wins for 2 in 1’s as well as Chromebooks, Ultrabooks, and PC’s. All these new products are expected to be accretive in 2015.

Intel isn’t glamorous as a Facebook or Twitter and it hasn’t really done that much lately either. But this legacy technology leader not only offers safety, but also plenty of growth at a very reasonable price. It isn’t easy to find many examples with these attributes in the market.

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Research WizardThis powerful screening and backtesting software puts you in control of your investment strategy. Use the same tool professional stock pickers use to find winning stocks in any market. Learn more...

Surprise TraderZacks’ research breakthrough isolates the most accurate analyst “whispers” to detect positive earnings surprises before they’re reported. The strategy’s tested accuracy is an unprecedented 77.32%. When alerted to “surprise stocks” before Wall Street can react to them, you can fully ride their price pops. Learn more...

Top 10 Stocks This annual stock portfolio provides the best group of 10 stocks to invest in during the year. The list is announced in January each year. We start with the Zacks Recommendation - a market-crushing measurement for long-term success - and use a nine-step process to hand-pick the 10 stocks you should buy and hold all year for effortless profits. Click here for the 2015 edition.

Value Investor This long-term service combines value criteria with Zacks Rank timing. We’ll track undervalued companies until the market starts to see their real worth. Then we’ll “pounce” for gains that can build for years. Learn more...

Zacks Method for Trading Learn how to use the Zacks Rank even more effectively than professional fund managers, with simple step-by-step instruction. Learn more...

The return numbers presented assume no transaction costs. Details of how Zacks calculates performance for the Zacks Rank Portfolios and strategies is available at: http://www.zacks.com/performance.