Sunday, February 18, 2007

Barron's Summary

Fund holdings include CEN, CAG, UNM, SOV, NSM, BAX, HD and PRU. Another fund manager likes DCX, HMC, HBC, CS, UBS, PUB and BSY.

Bulls on Timken (TKR) think its stock, now around 29, is headed for the mid-30s. Eventually, that's likely, but it could head lower first until signs emerge that its restructuring is bearing fruit. Analyst Mark Parr of KeyBanc has a tgt of 35. "The co's sensitivity to autos in conjunction with all of its manufacturing-restructuring activities over the past couple of years clearly has hurt earnings momentum," says Parr. "But given the recent run-up in auto-supplier stocks, Timken looks very timely right now."

Electronic Arts (ERTS) isn't playing games. Its earnings could more than triple over the next 2 years, and its shares could jump from 51 to 65 within 12 months.

Barron’s thinks that the growing popularity of Jack Daniel's could propel Brown-Forman's (BFB) shares to 80 from a recent 66.

DaimlerChrysler's (DCX) shares, up nearly 40% in the past months, could climb above 80 if Chrysler fetched a decent price. But finding a willing buyer is sure to be difficult. The idea of a GM-Chrysler deal certainly strains credulity. "Take your pick - 'the blind leading the blind' or 'two wrongs don't make a right.' We ran out of clich├ęs to use," wrote Shelly Lombard of Gimme Credit.

“The Trader” column out saying that Sony’s (SNE) stock has been dull and flat for so long a recent uptick warrants a closer look. Sure, predictions of a Sony revival have been consistently premature, and the electronics giant has become a cautionary tale about squandered opportunity. An unwieldy empire stretching from movies and music to financial services and insurance also makes it a symbol of bloat. But its push to improve efficiency will eventually pay off, and investors' decade-long disregard hints at the potential upside should they come around. "Nearly everyone hates it, nobody appears to have done any work on it, yet the stock continues to show technical improvement," says John Roque of Natexis Bleichroeder. Credit-Suisse, for example, says the sum of Sony's parts would value its ADRs at 64, 22% higher.

“Review” section discusses Nike (NKE), whose Air Force One turned 25 last month, and Nike celebrated by launching Air Force 25 and collaborating with MTV on a special highlighting the shoe's history. It's a sure bet AF25, like its predecessors, will fly off the shelves. That should help Nike maintain its dominant share of the athletic-footwear mkt, and keep its high-flying stock surging. In their plan to reach $23bn in annual sales by 2011, Nike officials last month called Air Force One "the most iconic product and loved basketball shoe ever...a cult of itself." Limited production and smart marketing have kept it cool: Prices of some collectors' edition models have hit $2K. As hot as Crocs (CROX) are right now, they are a long way from having their own MTV show or rap song. Nike stock's got game. The shares hit an all-time high of 106 last week. If Nike gains share and grows margins, the stock could reach 115 in a year, says BofA analyst Robert Ohmes.

Barrons’ “Follow Up” section speculates if BHP Billiton or Rio Tinto hopes to buy Alcoa (AA) they might have to pay a lot more than $40bn, the price tag attached to the rumors. John Buckingham, of Al Frank Fund, understands why BHP and Rio Tinto might be interested in a deal, especially at a bargain price. After all, he says, "the ugly duckling is now a swan." But he views a bid of $55 a share, or about $48bn, as a much fairer price for Alcoa holders.

According to the Barron’s, Adams Respiratory (ARXT) investors may have a bit more to worry about than the approaching end of cold-and-flu season, a potential generic version of Adams' popular mucus thinner Mucinex. Its shares, are up 142% since Jul05 IPO. But an application accepted by the FDA for a generic version of Mucinex by Pharma Holdings, Mutual Pharma and United Research Labs has remained largely off the Street's radar screens. Adams arrived at its patent by shrewdly taking a cheap compound that had been on the mkt for decades, testing it and gaining FDA approval and exclusivity. The rather routine challenge came Aug. 6. Adams, as is typical in such cases, sued the applicants in Federal District Court in Philadelphia to enforce its patent, gaining the requisite 30-month stay on any competing generic version. But a high-expectation stock with a multiple at 24x F07 earnings that sank 9% on a margin shortfall might not easily absorb the "headline risk" of a legal threat to its largest product.

“Technology Trader” out saying generic competition for biotech firms like Amgen (AMGN) and Genzyme (GENZ) drew a step closer Wed, when a bipartisan group in Congress introduced a bill to authorize FDA approval of generic biologic drugs. High prices for biologic drugs are welcomed by biotech shareholders, but not by health care's payers. The biggest biotech spender is Uncle Sam himself, under the Medicare program, which spent over $3bn on just 3 anemia drugs from Amgen in the F05. So after Amgen's patents expire, the govt and private insurers would love to see competitive pricing. Sanford C. Bernstein biotech analyst Geoffrey Porges said: "Amgen is obviously the big tgt here." Once biogenerics became law, the FDA would need a long time to draw up regulations. And even under those regulations, the "comparability" testing of some biogenerics could take years. And of course, patent claims must be put to rest. That long runway gives Amgen and Genzyme time to introduce new drugs. But it would also make the biogeneric game less competitive for those who can afford to play it. Those who've shown an interest include manufacturers like NVS, PFE, TEVA, BRL, ESRX and MHS.

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