Sallie Mae, W.R. Berkley Corporation, Sherwin Williams, D.R. Horton and Wells Fargo

CHICAGO--([ BUSINESS WIRE ])--[ Zacks Equity Research ] highlights Sallie Mae (NYSE: [ SLM ]) as the Bull of the Day and W.R. Berkley Corporation (NYSE: [ WRB ]) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Sherwin Williams (NYSE: [ SHW ]), D.R. Horton (NYSE: [ DHI ]) and Wells Fargo (NYSE: [ WFC ]).

Full analysis of all these stocks is available at [ http://at.zacks.com/?id=2678 ].

Here is a synopsis of all five stocks:

[ Bull of the Day ]:

We are upgrading our recommendation on the shares of SLM Corporation, or Sallie Mae (NYSE: [ SLM ]) to Outperform. The company's third quarter earnings were well ahead of the Zacks Consensus Estimate, driven by an increase in loan originations and improvements in the credit markets.

However, loan loss provisions were high. The company's leading position in the student lending market and its sturdy cost structure provides it an edge over its peers, given the expected growth rate of the college-age population. Its business is less prone to interest rate volatility than many other financial institutions.

However, in the near future, the company could face uncertainty over the enactment of the legislation concerning eliminating private lenders from the student loan market. Additionally, the stressed economic conditions and credit market challenges are expected to be a drag on earnings.

[ Bear of the Day ]:

We are downgrading our recommendation on the shares of W.R. Berkley Corporation (NYSE: [ WRB ]) to Underperform from Neutral.

W.R. Berkley's third quarter earnings report showed lower premiums written, reflecting the overall competitive business environment and pricing pressures. The company's combined ratio, which has increased of late, is also expected to rest at higher levels for some quarters to come.

Though management has historically managed capital, the company's current debt-to-capital ratio stands at approximately 30%. Also, the company has experienced deterioration in its fixed charge coverage ratio and return on equity.

Latest Posts on the Zacks [ Analyst Blog ]:

Pending Home Sales Tumble

The National Association of Realtors (NAR) reported that Pending Home Sales plunged 16.0% in November from October, but are 15.5% above year-ago levels.

Used home sales are recorded at closing -- not when the deal is reached -- which often results in a delay of as much as two months. The pending home sales report is based on the number of handshakes, and is thus a good leading indicator of the number of closings over the next month or two.

In recent months, used home sales (which are what the report tracks) have been much stronger than new home sales. Historically there had been a stable relationship of about 6 existing home sales for every new home sale; in November, the ratio was 18 to one. However, the tax credit for first-time home buyers (now expanded to include almost all home buyers) has mostly gone to stimulate used home sales.

Used home sales only indirectly stimulate the economy, mostly by raising the incomes of the people working at Coldwell Banker, and because people tend to slap a new coat of paint on the walls after they move in, which is good for firms like Sherwin Williams (NYSE: [ SHW ]). It is new home sales that really stimulate economic activity and have historically helped pull the economy out of recessions.

However, with a glut of housing on the market, in a "big picture" sense it is not a very good idea to be pouring resources into making more houses, even if it would result in more construction jobs and more profits for firms like D.R. Horton (NYSE: [ DHI ]).

For that to make sense, new household formation has to increase, which will stimulate real new demand rather than efforts that simply shift people form being renters to being owners. That just results in higher rental vacancies, which puts downward pressure on rents.

Since renting a home is a good substitute for owning a home, downward pressure on rents will result in downward pressure on housing prices. The tax credits can prop up housing prices in the short term, and the evidence suggests that they have been doing just that.

A large part of the $8000 home-buyer credit is captured by the seller of the house rather than the buyer through a higher price for the house. At the margin, this might be keeping some people from slipping underwater on their mortgages and thus is encouraging them to continue paying. That is obviously also helpful to the holders of those mortgages, like Wells Fargo (NYSE: [ WFC ]) -- yet another indirect form of aid to the big banks.

Get the full analysis of all these stocks by going to [ http://at.zacks.com/?id=2649 ].

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.

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Sallie Mae, W.R. Berkley Corporation, Sherwin Williams, D.R. Horton and Wells Fargo