Barron's Summary

Barron’s cover discusses Costco (COST), whose determination to deliver value and innovative products to its 23M members has made it one of the country's top retailers. Article suggests that Costco shares are no longer dirt-cheap, but in view of the co's superior mgmt and opportunities for growth, neither are they rich. "Retailing isn't rocket science. Costco has figured out the big, simple things and executed with total fanaticism," says Charles Munger, a Costco director. Munger is better known as Warren Buffett's long-time partner at Berkshire Hathaway (BRKA). Crucial to the chain's success is CEO Jim Sinegal, who co-founded Costco in 1983. "Jim would be on any intelligent list of the top 10 retailers of the past century," Munger says. While some retailing analysts deem Costco shares expensive, the co seems to qualify under one of Buffett's investment dictums. Buffett has said he'd rather buy a good business at fair price than a fair business at a good price. Berkshire owned 5M Costco shares at the end of Sep.

Energy research firm pick’s include: APC, CHK, APA, ECA, CNQ, LINE and EVEP.

At around 51 a share, UnitedHealth (UNH) fetches an inexpensive 15x future earnings. With sales and profits up smartly, the stock could climb to the 70s in 12-24 mo’s. "UnitedHealth has great prospects and potential," says CEO Stephen Hemsley, noting that spending on health care is expected to double to $4trln by 2015. "You can hardly find an enterprise in the health-care space that is better positioned and has our diversification." "All of UnitedHealth's metrics are significantly ahead of the mkt," says David Mandelbaum, of Omega Advisors. He points to the co's 7.5% FCF yield, 22% ROE and strong earnings growth.

“Sizing up small cap” section out saying that in the lucrative business of drug and alcohol testing, the venerable plastic collection cup is being challenged by an impressive upstart, the oral swab. Testing saliva increasingly looks to be faster, cheaper and less invasive than examining urine. But that doesn't mean that co’s selling gear for saliva test are worthy investments. To the contrary, most of them are, well, spitting into the wind. Oral swab co’s mentioned include ABMC and AVTI.OB. Co’s dependent on spit tests are ahead of their time, and getting clobbered. The best bets are urine-tester Medtox (MTOX) and OraSure (OSUR), an HIV tester with a saliva drug-test in waiting.

“The Trader” section speculates on possible LBO candidates. Zhiping Zhao, of CreditSights, flagged co’s like ADI, LLTC, MXIM, ALTR XLNX, STM and IFX as potential LBO tgts. If telecom-equipment co’s fluctuating cash flow gives buyout investors pause, heavyweights like Motorola (MOT), Ericsson (ERIC), and Nokia (NOK) that have under-leveraged balance sheets could face shareholder pressure to unlock value. So too could fallen angels like Sycamore (SCMR), and smaller equipment vendors like Tellabs (TLAB).

“Technology Trader” section highlights Novo Nordisk (NVO), which has been the leader in sales of insulin-related products everywhere in the world except the US. If Novo's well-regarded products can take more mkt share here, as they have abroad, the co's ADRs may continue their climb. "The US is the only country where we were not leaders," said Novo's CEO, Lars Rebien Sørensen, the other day in NY. "For many years, we were the underdogs." But Novo has been on a roll, winning patients and doctors over to its "insulin-analog" products. These variants of the human-insulin molecule work somewhat better, sell for about twice the price and enjoy patent protection for a number of years to come. Novo and its rivals, Eli Lilly (LLY) and Sanofi (SNY), have gotten about half of insulin-using diabetics to change to analog products. Yet Novo's winning more than its share of those converts, b/c its product line is the most complete and its prepackaged injection devices the most convenient.