Sunday, July 23, 2006

Notablecalls - Paperstand - Barron's

Barrons' cover story discusses general mkt condition and highlights ten stocks they recommend to buy, due low valuation. Those stocks include Chevron (CVX), Cisco (CSCO), Dow Chemical (DOW), General Electric (GE), Home Depot (HD), Lehman Brothers (LEH), Nestle, News Corp. (NWS), Vodafone (VOD) and Wal-Mart (WMT).

Barron's highlights Excelsior Large Cap Growth fund top holdings: GOOG, CELG, CMX, AMX, EXPD, ZMH, AAPL, QCOM, EBAY and AGN.

Barron's discusses ITC Holdings (ITC), saying that at 29, the co trades for 30x '06 ests. The shares could rally 20% in the next 2 years as profits rise. ITC is the nation's 10th largest and only publicly traded stand-alone transmission concern, which is poised to capitalize on regulatory changes that favor such independent entities. ITC focuses exclusively on the transporting of electric power, serving a population base of almost 10m customers in the metropolitan Detroit area and southeastern Michigan.

According to the Barron's, the housing mkt in Las Vegas may be overvalued by 42%. When it eventually tumbles, pinched residents are apt to curb their visits to Station Casinos (STN). The stock could be halved.

Notablecalls: The phrase "stock could be halved" sure does look ugly. Expect to see a steep (5-10%) drop in STN Monday morning.

According to the Barron's, Ashland (ASH) shares could be worth at least 20% more, if co spinoffs deliver the promised results. Putting all parts together and deducting corporate overhead at a multiple of 10x, Kip Meyer, of Advisory Research, arrives at a value of $5.83bn, or $81 a share. Such a valuation might interest private equity players as well: Morgan Stanley listed Ashland as a possible LBO candidate in a recent screening.

The "Follow Up" section discusses Yahoo (YHOO), saying that Barron's liked Yahoo at 29 and they like it more at 25. Yahoo took nosedive last week, when the co missed earning ests and delayed its search-engine advertising system. Larry Haverty of Gabelli Global Multimedia Trust has recommended that value-account clients at Gabelli buy Yahoo at these levels, noting that "unless Panama doesn't work at all, any problems with it are discounted." He calls the stock an "extraordinarily strong buy" at 13x trailing cash flow and sees the shares climbing to the high 30s, and possibly over 40.

Barrons' "Sizing Up Small Cap" section discusses favorably Energen (EGN), whose Alagasco unit is the largest gas utility in the state of Alabama. Regulators in Alabama are fairly accommodating, allowing Alagasco to earn an above-avg 13.15-13.65% ROE. For all of this year, Peter Vig, of RoundRock Capital, expects Energen to earn around $3 a share. Next year, he's looking for about $3.90. So the stock, at $38, is going for less than 10x the '07 est. Co's mgmt guidance for the year is $3.10-3.30 a share and $3.80-4.20 for next year. The shares are worth at least $50 or so, Mr. Vig reckons, if valued at a modest 13x his next year's est.

Barrons' "Technology Trader" section discusses Amgen (AMGN), saying that competition is growing for the co's cash-cow products. In Europe rivals are readying generic-style copies of its pioneering products. In US courts, Amgen fighting Roche Holding, which plans to sell a red-blood-cell-boosting treatment in America. And a more formidable rival in the EPO wars looms: Novartis (NVS). "We will have EPO in the European mkt, no question," Daniel Vasella, Novartis's CEO said to the Barron's. The EPO products from Novartis and Stada would compete directly against J&J (JNJ), which sells Eprex under license from Amgen. Novartis also has an indirect anti- Aranesp play; it owns a 1/3 of Roche, which sells CERA, a long-acting EPO product, in mkts outside the US. Amgen is trying to stop CERA from coming to America, by asserting its US EPO and Aranesp patents.

Notablecalls: No new information, biotech traders/investors know it all.

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