Sunday, September 24, 2006

Barron's Summary

An interview with Credit Suisse senior equity-research analyst highlighted in Barron's. Analyst picks include Harman Intl. (HAR) and Magna Intl. (MGA). Analyst has heard reports that Valeo is considering purchasing Visteon (VC).

According to the Barron's, Charles Schwab and Morgan Keegan dominated Barron's semi-annual ranking of brokerages' top share recommendations (Focus List). In 6 mo period, MK picks are up 21.15%; in 1 year period, MK picks are up 35.35%; in a 3y period, CS picks are up 68.56%; and in a 5y period, CS picks are up 74.03%. Morgan Keegan's Focus List, put together by research director Elkan Scheidt, profited from positions in the consumer-discretionary, energy and industrial sectors, as well as a healthy dollop of small- and mid-cap names, he says. Many of the them aren't closely tracked by big Wall Street brokerages. Lately, Scheidt has lightened up on energy, removing UPL, ESV, and HP from the list. He's also added railroad Genesee & Wyoming (GWR), after it fell, and Phillips-Van Heusen (PVH).

Near 80, Deere (DE) shares are off more than 11 points from May's high. The stock could hit $105, in a year and $134 in two, as rising corn prices put more cash in farmers' pockets.

At $17.8, Nidec (NJ) trades for a rich 30 times earnings. But the stock could climb 15% to 20% as the company's growth rate increases. One fan says it should be a "core stock."

"The Trader" column highlights potential LBO list, including: ADP, FISV, LXK and CHKP. The article also highlights Goldman Sachs "most overvalued" list, including: WEN, MHP, SLE, KMI, LTR and MEL. One unlikely buyout is APCC.

According to the Barrons' "Technology Trader" section shares of NeuStar (NSR) were jostled Fri by a fierce debate. In the morning the shares of NeuStar fell 4 bucks, or about 14%, to $25, b/c NeuStar said it had agreed to a 10% cut in the fees it gets from US phone co's for operating the country's call-routing database. But by the end of a day of nearly 10x its normal volume of trading, NeuStar stock closed back at 28.34, down just 2% for the day. It's fair to say that there's a divergence of opinion about what NeuStar's price cut augurs. NeuStar's growth spurred investors to send its shares as high as 37.73 by May of this year, a climb of 70% from its Jun'05 IPO. NeuStar's May price represented a mkt value of $3bn, or 9x the $330m in revs that analysts anticipated for '06, and 40x the consensus est for $0.93 in EPS. That invited the scrutiny of skeptical investors who, as of May, had shorted about 13m shares on the advice of analysts like Mark Roberts and his team at Off Wall Street Consulting Group. Mark Roberts is glumly sticking to his view that NeuStar shares could drop to $18. "The fact they had to renegotiate this contract that still had 5 years left shows they are not in a very strong position," he grumbled. "They are making a silk purse out of a cow's ear."

Barron's interviewed Symantec (SYMC) CEO John W. Thompson. It just so happens that the big security-software vendor's products account for 45% of the sales of Digital River (DRIV). Since Nov'05, Digital River's shares have more than doubled, to about $50. That's raised the co's valuation to 7x trailing 12 months' sales and 17x trailing cash flow and probably tortured the skeptics who'd sold short about 8m shares as of August. One of the persistent short stories about Digital River is that its big customer Symantec will go away. According to the story, Symantec would take its online sales in-house, cutting out the middle man Digital River. So Barron's asked Symantec CEO Thompson if that was the plan. "Digital River will continue to manage our online storefronts," Thompson said. Digital River's computer systems are connected to Symantec's, and Symantec would need meaningful resources to replicate the Digital River system. Article suggests that it doesn't sound like Digital River is on Symantec's chopping block.

"Plugged In" section discusses CDW (CDWC), saying nothing new. Hewlett-Packard accounts 28% of the co's revenue and it main competitor is Dell. "Generally speaking, we can do things more quickly than Dell," CEO John Edwardson says. So, "if we do what we do very well, we can continue to take mkt share," he adds. In short, selling the right stuff faster than the next guy at a competitive price is CDW's edge. What would Dell need to do to dull that edge? "They would have to invest a lot more in training and employing people," Edwardson said.

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