Goldman Sachs' chief U.S. investment strategist, Abby Joseph Cohen, says we may have a rough ride in early 2008; her picks are for a 12-month horizon. She likes defensive stocks, and companies that will do well regardless of the outcome of U.S. elections.
- Waste Management (WMI) - shares trade for less than 15x 2008e earnings, and carry a 3.3% dividend yield. Due to ongoing housing weakness, WMI is switching its focus from construction and demolition disposal to standard disposal operations, which should boost margins.
- Rohm & Haas (ROH) - has broadened its global footprint, and derives 35% of its sales from emerging economies. Despite investor concerns, only 15% of ROH's business is tied to housing. [Another analyst notes ROH may be on Dow Chemical's (NYSE:DOW) 'short list' of coatings and electronics companies. Also note that Goldman lowered ROH to Neutral after the Roundtable.]
- Intel (NASDAQ:INTC) - should be a beneficiary when investors once again warm to semiconductor companies. Margins are expanding due to its shift of focus toward servers and notebooks. Shares trade at less than 15x 2008e earnings, and yield 2.6%, which Cohen notes is the same as 5-year Treasury bonds. In 2002, INTC traded at 48x earnings.
- Xilinx (NASDAQ:XLNX) - a producer of programmable logic devices, the market for which should grow due to new applications. Like Intel, it trades at a four-year P/E low. The company may use its cash for share repurchases.