Barron's 2007 Analyst Roundtable, Part III

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ANALYST ROUNDTABLE: Multiple Choices by Lauren R. Rublin

Summary: Part III of Barron's annual Analyst Roundtable highlights the picks of the following five analysts:

Meryl Witmer (Eagle Capital): Cash flow is key and opportunity is everywhere."(1) Navistar International Corp. (NAVZ.PK) -- investors are focused on its Class 8 truck business, adversely affected by new environmental regulations, so it's undervalued, but its other businesses are solid. (2) Kaiser Aluminum Corp. (KALU) -- it emergered from bankruptcy in 2006 with no debt, a clean balance sheet, and stellar operations. (3) Texas Industries Inc. (TXI) -- Texas is the new Florida for housing with reasonable prices and continued growth; this concrete maker has expansion opportunities.
Marc Faber, emerging markets specialist:"Global macro trends lead the way." (1) Cresud Inc. ADR (CRESY) -- farmland prices are up 40% over the past 3-4 years, but are still cheap; it's a play on agricultural commidities. (2) ProShares Short MidCap400 (MYY) -- when the mid-cap index comes down, this goes up. (3) iShares Dow Jones US Broker-Dealers Index Fund ETF (IAI) -- short it; Goldman Sachs Group Inc. (GS) will one day be a very good short.
Oscar Schafer, New York money manager: Keep an "eye on the products companies make -- how they work and fatten the bottom line." (1) Flamel Technologies S.A. (FLML) -- it has an important new partnership with GlaxoSmithKline (GSK), and its innovative drug delivery methods give it tremendous potential; the stock could double or triple. (2) Shire Pharmaceuticals Group plc (SHPGY) -- the company settled issues with other producers, and 2007 should be an active year with multiple new drug launches. (3) Avis Budget Group Inc. (CAR) -- a fluky 2006 saw margins drop to 2.9%; management has laid out a plan to return to 8%, and it could be an attractive acquisition candidate. (4) Sally Beauty Inc. (SBH) -- it plans major expansions into Canada, Mexico and Brazil, will deleverage $1.8 billion of debt rapidly, and has operational improvements that will increase cash-flow. (5) Tesco Corp. (TESOF) -- its 'casing drilling' technology will replace conventional oil drilling because of its increased speed and lower costs; the stock ($17) could be $28-30 by year end.
Fred Hickey, author of the High-Tech Strategist newsletter: (1) Research In Motion Ltd. (RIMM) -- short it. Unless RIM becomes the next Motorola, there's a lot of downside. (2) Apple Computer Inc. (AAPL) -- short it. AAPL is 1/5 the size of Hewlett-Packard Co. (HPQ), yet their market caps are very close ($75b vs $100b). IPod growth rate is falling apart, and computer sales are down. The ongoing options investigation means CEO Jobs is still at risk. (3) Lam Research Corp. (LRCX) -- short it. After the Microsoft Corp. (MSFT) Vista launch, anticipate a huge drop in memory prices; LRCX could collapse in a hurry. (4) Heelys Inc. (HLYS) -- its rollerblade shoes are a fad that's already fading. (5) streetTRACKS Gold Trust ETF (GLD) and iShares Silver Trust (SLV) -- if you want to bet the Fed will cut rates, the dollar drops, and gold rises, this is the way.
Mario Gabelli: He looks for "deals and steals, consumer trends and the math behind undervalued outfits." (1) Cablevision Systems Corp. (CVC) -- Time Warner Inc. (TWX) is a potential buyout initiator, or the Dolan family may take it private; the competition makes it a win-win. (2) Groupe Danone (DA) and General Mills Inc. (GIS) -- yogurt and health cereals are a play on health and wellness, a booming industry. (3) Brown-Forman (BF.A) -- Jack Daniels is one of the top-seeling premium branded products in the world. (4) International Flavors & Fragrances Inc. (IFF) -- growing demand for flavors and fragrances in emerging markets, and a shorter product lifespan, will boost sales. (5) Energizer Holdings Inc. (ENR), AutoNation Inc. (AN), AutoZone Inc. (AZO), Waste Management Inc. (WMI) -- companies with great share buyback programs. (6) GATX Corp. (GATX) -- U.S. municipalities are selling infrastructure to fund healthcare and pension costs; GATX leases railcars. (7) Sequa (SQA.A) -- as demand for aircraft grows, so will this jet-engine maker and repairer. (8) Liberty Media Capital (LCAPA).

Related Links: Barron's 2007 Analyst Roundtable, Part I, Barron's 2007 Analyst Roundtable Part II

Comments

[Tommo_UK]

Contrary to Fred Hickey's statistics, APPL'e ttm PE is just 30 (not 38), and its forward PE just 22 (not 31). If you back out the $13/share in cash, then AAPL's forward PE is just 18.

Huh? That's expensive? That would be low even if AAPL were growing earnings by 20% YoY, let alone the 30-40% it is comfortably maintaining.

Fred Hickey said iPod growth rates are falling apart. They grew 50% YoY last Q, for a record 21m iPods. Mac sales are growing 30% YoY - that demonstrates plunging Mac sales?

Someone should call him out on this call. Hickey is on another planet. I wish there was an ETF on Fred Hickey so I could short it.