Sunday, December 10, 2006

Barron's Summary

Barron’s cover discusses mkt forecast for 2007. Strategists are forecasting a fifth straight year of positive stock returns, albeit more muted gains than those achieved in 2006. Only few stock mentioned in the article, including GD, MER, DF and WFT.

Medtronic (MDT) rallied 10% in recent weeks, to 53, on renewed growth, Some fans think the shares could climb into the 60s as new products spur sales.

The shares of Nortel (NT), little changed in 3 years, could jump by more than a third in the year ahead as long as restructuring finally starts to show results. And bigger gains may follow.

News-publisher GateHouse's (GHS) big dividend has attracted investors, but shares of rivals like Gannett (GCI) and Lee Enterprises (LEE) may offer more value right now.

Investors should put Alcon's (ACL) recent problems into perspective. Within 2 years, the co's shares, recently around 113, could be changing hands near 140.

„The Trader” column discusses Southwest Airlines (LUV), saying that if things go right for the industry, a Southwest stock price of 18 is justifiable one year out, and 20 two years out. With about $3 a share in cash and little debt, Southwest could even be a LBO candidate.

„The Trader” column highlights several LBO candidates, including BC, CVH, CNQ, IR, SUN and TKR. Article notes that top LBO candidates are still LEN, MDC, and RYL. LBO rumors also circling HD.

„International Trader” section highlights Vodafone (VOD), saying that thanks to its enlarged portfolio of assets in emerging mkts, it's still growing. In fact, it won't be long before such operations deliver more value to the co’s shareholders than do the co's established, mature mkts. Vodafone expects 60% of its growth in the next 5 years to come from emerging mkts. That's equivalent to an annualized growth rate of more than 12%, compared with 4% in the co's mature mkts. For now, Vodafone's shares are trading at a lowly forward P/E multiple of 10.85, having underperformed many of its peers over the past year. But it's about time that investors recognize some of Vodafone's emerging-mkt potential rather than treating the stock as dead money b/c of slack or nonexistent growth in its developed mkts.

“Follow Up” section highlights Intuit (INTU), suggesting that Digital Insight acquisition is actually a good news. The planned melding of Intuit's financial software into the online services offered by DGIN's stable of 1,700 regional and smaller banks could prove irresistible to both individuals and small businesses. Instead of just paying bills online, small co’s will also be able to track inventory, invoice customers, do payrolls and accept credit-card payments. "At the old-Intuit we were looking for not-very-exciting, high single-digit annual sales gains," says Dave Joseph, of Morgan Stanley. "This acquisition changes that, opening a whole new channel for growth....I think the co is much more of a growth story than it was before." Morgan Stanley's Joseph sees the shares rising over the next year, to about 38. And later gains could be even bigger.

“Technology Trader” discusses favourably EDS (EDS), saying that even after an 18% run, EDS stock is cheaper than it was a year ago, at about 18.9x ‘07 expected earnings of $1.43 per share, vs a forward P/E multiple of 23x a year ago. The stock trades at a 36% discount to the past 12 months' sales, compared to Infosys, which fetches 7.5x sales. Both, Barron’s Online and WSJ highlighted EDS positively last week.

“Plugged In” section discusses potential Apple (AAPL) and Disney (DIS) cooperation or even merger. The Pixar deal has clearly put Steve Jobs in a position to leave a mark on the House of Mouse. And Disney is ready to play a leadership role in the convergence of content and technology.

Fund top holdings include GME, PCL, RAD, TRMP and Q.

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