Barron's Summary

Barron’s cover sroty discusses Alzheimer disease plays. Those at a bargain price include BMY, LLY, GSK, MRK, PFE, SGP and WYE. Smaller co’s mentioned with Phase 3 drug candidates include NRMX and MYGN.

Barron’s highlights negatively First Marblehead (FMD), saying that after a big run last year, the stock has begun tailing off. The worst may still be ahead, as the default rate on student loans backing some securities approaches a dangerous 9%.

Barron’s suggests that as newsprint-industry fundamentals improve, Bowater (BOW) could rally into the mid-30s from a current 23 a share, and Abitibi (ABY) could rise to 5 from 2.80. As a reminder, those two co’s announced merger on Jan 29. In a "merger of equals," Bowater shareholders will get 52% of the combined company, to be called AbitibiBowater, and Abitbi holders will receive 48%.

Walter Industries (WLT) is pushing to unlock value by selling its home-building and mortgage units. The company's assets could be worth as much as 38 a share, 52% above its current stock price.

According to “The Trader” section, Bruce Bartlett, of Lord, Abbett & Co., has been focusing on co’s that can deliver conspicuous profit growth driven by good old-fashioned sales increases, and not just nimble financial engineering and buybacks. Among tech co’s, Bartlett believes "gatekeepers," those with a product or service others need to expand, will enjoy keen demand and strong pricing power. One such example is Akamai (AKAM). Rev climbed 51% last year and is expected to rise more than 40% this year, with few competitors boasting its scope and quality of service. Analysts have roundly raised their ests to catch up to Akamai's, and Cowen & Co., for one, flags it as an "excellent large-cap play on the growth of multimedia Internet content."

MEMC Electronic Materials (WFR), which straddles a similarly choice spot in the semiconductor world. A current polysilicon shortage should at least support, if not drive up, prices of silicon wafers, and the relentless drive for increased memory capacity bodes well for wafer demand. The growing mkt for solar chips is another reason MEMC margins continue to strengthen.

Meanwhile, some consumer stocks also might better withstand any belt-tightening, since Americans holding off big-ticket splurges may still pay for smaller addictions. The video-game maker GameStop (GME) targets not just kids, of course, and a new generation of consoles has game geeks agog, and is fueling another boom. No question, all 3 stocks are trading near 52w highs, and none are cheap by conventional P/E measures. GameStop was among last week's top gainers, while MEMC was among the first quarter's. "But as we transition to a slower economy, and as profit growth starts to become scarce, stocks that can deliver above-avg growth should begin to command a greater premium," Bartlett says.

“The Trader” also highlights Omnivision (OVTI), whose shares are down 61% since last May. Profit margin has begun its slide, and while rev has held near $135m over the past 3 qrtrs, net income has tumbled from $22m to $11m. Analysts are calling for a 44% drop in EPS this year. Zealous bearish bets, about 40% of tradable shares are sold short, mean that short covering can send OmniVision shares momentarily higher. The co also has nearly $6 a share in cash. But RW Baird analyst Tristan Gerra expects the cash holding to "continue to erode as mgmt spends in an attempt to reverse course with, however, no expected effect on rapidly deteriorating fundamentals." Gerra has a price target of 8 on the stock, or 15x ‘08 earnings.

“Follow Up” section discusses favorably General Dynamics (GD), saying that the co’s CEO has given guidance of just $1.9bn in profits for '07, explaining that budgetary politics complicate rev stream forecasts. Those with a short-term orientation have every right to be nervous, but long-term investors should look beyond the Capitol Hill tug-of-war to see a solid co in an indispensable industry.

“Follow Up” also highlights Beazer (BZH), whose shares took nosedive last week. "Anyone holding the stock now is in a very speculative situation," says AG Edwards analyst Gregory E. Gieber. "Even without the probes, Beazer faces the same problem of declining sales and profits that everyone else in the industry currently faces," he adds.

Morgan Stanley strategist Henry McVey favors VLO, X, MCK and UIS. Expensive stocks include UST, DHR and PAYX.

“Technology Trader” section out positive on Broadcom (BRCM). The article is similar to March 28. Barron’s Online article. (See archives).