Barron’s Digest January 1, 2007 Issue

Home Deport and Lowe’s  (HD)(LOW) may be ready for their shares to move up. Both companies still have a great deal of cash. WIth below market P/Es any good news in the housing market could help lift both firm’s shares.

Safeway’s stock is up 48% over the last year on improvements in many of its stores. (SWY) Its P/E is not higher than rival Kroger’s (KR) and Supervalu (SVU) The rivals are not replicating the Safeway formula, and that could hurt the stock.

Great Plains Energy  (GXP) is getting big rate increases from customers while meeting a growing electricty demand in the MidWest. With its large dividend, some investors see the stock going up as much as 13% over the next year.

Large corporations that give goods to charity can build stronger relationships with customers. The 15 largest companies in terms of value of donations in 2005 were:  Pfizer (PFE), Merck (MRK), Bristol-Myers (BMY), Johnson & Johnson (JNJ), Microsoft (MSFT), Time Warner (TWX), Wal-Mart (WMT), Altria (MO), GE (GE), IBM (IBM), Target (TGT), Safeway (SWY), Exxon (XOM), Bank of American (BAC), and Citigroup (C).

The new AT&T (merger of AT&T and BellSouth) (T)(BLS) may be much larger that Verizon (V), but its will rely on a conmination of optical fiber and cooper to deliver voice, video and internet. Verizon will use only new fiber. Cable companies do not see the older AT&T plaform as much of a threat. AT&T has relied to DirecTV and Echostar to help (DISH)(DTV) deliver TV but those companies may become competitors over time.AT&T’s core voice products are being attacked by successful VoIP products from companies like Comcast (CMCSA), and the cable unit of Time Warner (TWX). Future gains in A&T stock may be very tough to come by.

The markets believed that the new Microsoft Vista OS (MSFT) would drive demand for DRAM chips because it uses more memory that its predecessor. But, most of the upswing in purchase of these chips is now in the past. And, that could hurt some stocks in the sector: Micron (MU), Quimonda (QI), Samsung, and Hynix.

Barron’s picked the stocks from the S&P 500 that have had dividend gains each year over the last 25 and have high investment grades ratings: Abbot Labs, Altria, Archer-Daniels, Automatic Data, Bank of America, BB&T, Becton, Dickinson, CenturyTel, Chubb, Coca-Cola, General Electric, Johnson & Johnson, Kimberly-Clark, Lowe’s, PepsiCo, Procter & Gamble, Regions Financial, Target, VF, Walgreen, Wal-Mart, Wrigley, and W. W. Grainger.

Insider buying and selling varied by industry in 2006. Software companies had a lot of sellers including Microsoft (MSFT), Oracle (ORCL), and Google (GOOG). Selling was also substantial in telecom including management from Qwest (Q), Time Warner Cable (TWTC), and Verizon (VZ). In the finance sector many insiders were buyers includig management at  First Horizon (FHN), Jefferies (JEF), and Alesco (AFN).  Reit purchase by management were also notable lead by Extra Storage Space ((EXR) and U Store It  (YSI).

Douglas A. McIntyre