Monday, July 31, 2006

Notablecalls - Barron's Summary

Barron's cover story discusses China economic in general. No stocks mentioned.

Barron's highlights Epoch Investment Partners (EPHC), which assets under mgmt have returned 17.2% after fees for the past 3 years, vs 11.2% for the S&P's 500. CEO says that if they can continue to perform for clients as they build the firm out, there is no reason why the firm can't become a $10-12bn entity in a 3-5 year period. CEO's best picks include DVA, OMM, CMCSK, BG and AMD.

According to the Barron's Coach (COH) is down sharply, to 27-28 this year, on concerns about consumer spending. The near-term downside is about 10%, but the upside could be more than 25% in a year.

Barron's discusses El Paso (EP), saying that the stock has rebounded to 15.60, from 3.45, but the gains are far from over. The stock is likely to trade up to 20, based on earnings growth and the value of the co's reserves.

According to the Barron's, Tetra Tech (TTEK) stock's recent dip looks like a buying opportunity. The shares could climb by about one-third over the next year, to 20, as demand stays strong and profit margins improve.

"Sizing Up Small Caps" column discusses Range Resources (RRC), which is extracting natural gas from unconventional sources like tight sands, coal beds and shale. Analysts peg Range's '06 cash flow at $3.50 a share and over $4.60 for '07. Based on those numbers, shares are trading somewhat below those of the co's peers, while Peter Vig, of RoundRock Capital, figures they deserve a premium. In 18 mo's, he expects the stock to trade at $40. Mr Vig also likes Denbury Resources (DNR), exploration and production co heavily weighted toward oil. The consensus puts Denbury's cash flow at $3.50 a share this year and around $4 next. So at 32 and change, the stock is going for 9.3x this year's estimate and 8.2x next, a fair notch above its peers. But Denbury, pure and simple, is unique. The co lays claim to the biggest reserves of carbon dioxide for tertiary oil recovery east of the Mississippi. In fact, from East Texas to Florida, Denbury's reserves are the only significant known natural source of CO2. Mr. Vig sees the stock at $45 in 12 mo.

Notablecalls: Peter Vig highlighted EGN in a last week Barron's. EGN moved from 38 to 42 in a week. Expect to see similar moves in RRC and DNR.

Technology Trader column discusses semi sector, saying that the PC semiconductor business is getting competitive in ways that may be better for consumers than investors. Intel (INTC) and AMD (AMD) are battling brilliantly on price and technology, but growth in their PC end-mkt has decelerated. So even though Intel may look like a cheap stock, more diversified semi issues look like better bets these days. Instead of Intel, investors might instead take a gander at microcontroller maker Microchip (MCHP); the analog semiconductor vendors Linear Technology (LLCT) and Analog Devices (ADI); and the wireless chip giant Texas Instruments (TXN). "I don't think it really makes sense to own Intel or AMD when there's a price war," says Adam Parker, of Sanford C. Bernstein.

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