Barron's Summary

Most professional money managers questioned by Barron’s are turning cautious, after the Dow reached 13K mark. Many one-time bulls appear to have moved into the neutral camp, which now encompasses 37% of managers, up sharply from last fall's 20%. The bears' ranks, on the other hand, have stayed constant at around 17%. Ironically, this is just the sort of pessimism that über-bull Carl Marker likes to see: "There's always something out there to be fearful of - the US dollar, the deficit, an unpopular war," says Marker, of IMS Capital Mgmt. "In the face of all this negativity, interest rates are low and stock prices are lower. Fearfulness makes us comfortable. We don't like to see optimistic predictions by investors or investment advisers." He espies one such bargain in the shares of Service Corp. Intl. (SCI). IMS owns about 1.265m shares. Service Corp. trades at around 12, or 18x analysts' ‘08 earnings ests of 58c a share, although annual earnings are growing by 22%. Marker thinks the stock could rally to 20 in the coming years as the mkt "anticipates" an explosion in demand that will ultimately come when growing numbers of baby boomers start dying off.

Charles Hess, of Inferential Focus, saying that the DoD has begun to embark on building a whole new global-networking system similar to the Internet called the GIG, or Global Information Grid. About $34bn is committed to this secure- communications system. Some co’s that are benefiting are Globecomm Systems (GCOM), SAIC (SAI), Radvision (RVSN). Mr. Hess also likes CSCO, CRXS, PLCM, OPTC and ILC.

According to the Barron’s, technical indicators point to excesses in the current bull market, and in individual stocks such as Kohl's (KSS) and AMD (AMD). But other issues, including BHP Billiton (BHP) and Millipore (MIL), look to have more room to run.

Electric-utility stocks have climbed at three times the rate of the S&P the past year -- and gains should continue for three to five years for nuclear players in power-constrained markets. Co’s mentioned include: EXC, ETR, D, CEG, NRG, CCJ, FLR and CBI.

Barrons’ analysis suggests that the shares of American Real Estate partners (ACP), at $110, carry a nearly 70% premium to their underlying value. That's too high, even for a play on Carl Icahn's investment savvy.

“The Trader” highlights Valero (VLO), which last week reported a 30% rise in 1Q net income and tripled its share buyback plan to $6bn. While some of the anticipated good news has materialized, further upside remains possible. A nearly 40% rise in operating income was driven by improving refining margins that should stay robust through the summer. Gasoline demand, for instance, shows few signs of abating, despite rising pump prices. Meanwhile, stricter product specifications, more complicated refining processes and tighter labor all help limit supply, and "refining margins could stay higher for longer than most on Wall St. expect," says FBR analyst Eitan Bernstein. Valero also remains the cheapest of the large refiners, Bernstein notes. At about 71, it trade at 9.7x FBR's ‘08 earnings este, compared with 10.8x for Sunoco (SUN) and 12.1x for Tesoro (TSO).

According to the Barron’s, continued steady flow of new contracts and acquisitions promise to boost Tetra Tech’s (TTEK) profits above expectations and drive the stock into the mid-20s over the next year. Also, Tetra Tech is widening its pool of opportunities beyond it traditional govt work building dams and cleaning up sewer systems and polluted rivers. It's now buying co’s in the energy, automotive and mining spaces. The purchase of Delaney Group could prompt mgmt to lift the high-end of its guidance for the year, according to Debra Coy of Janney Montgomery. "Tetra Tech is building momentum, and the level of investor enthusiasm will likely build as the year progresses," predicts Coy, who adds Tetra could be viewed as a "sexy-growth stock in the latter half of this decade." If, as some bulls expect, Tetra lifts operating margins into high single- to low double-digits over the next couple of years from about 7% currently, the stock could ultimately set happy investors off into an aquatic ballet.

“Review” section discusses Raser (RZ), which in ‘05 claimed big auto co’s and the US Army liked its advanced electric motor. Now, the co is into geothermal energy. More specifically, Raser is into geothermal tax credits. The federal govt allows a 2c tax credit for each KW/h of electricity generated from alternative energy sources. CEO Brent M. Cook formerly sold tax credits for coal-based synthetic fuels and he now has Raser leasing up geothermal rights in Utah and Nevada. "We have probably one of the best resource portfolios for geothermal that exists in the country right now," says Cook. Raser has less than $20m, so it would share the tax credits with partners. Alas, the tax law requires that the plants be ready to generate electricity by the end of ‘08 and it'll be another month before Raser even starts drilling exploration holes, a tight schedule which others in the industry say is not feasible. So Raser's racing the clock, unless Congress, as Cook fully believes, extends the deadline. Even so, he thinks he can get 30MW of generating capacity into service before ‘08 ends. Yet at Raser's $350m mkt value, investors are assuming it will build the 30MW and much, much more. Based on 8,760 hours a year, no downtime and a 5% discount rate, the present value of the 10y of credits on 30,000KW/h of capacity is barely worth $43m.

“Sizing Up Small Caps” column out positively on Brightpoint (CELL). The article is similar to one issued on April 25th in Barron’s Online (see NC archives).

This weeks “Technology Trader” has highly entertaining article on Nano Chemical (NCSH.OB). CLICK HERE to read whole article.