Ockham research has picked the Dow stocks that it thinks will do the best in 2007 based on price earnings and other metrics. Their choices are Wal-Mart (WMT), Home Depot (HD), Microsoft (MSFT), General Electric (GE), Pfizer (PFE), Johnson&Johnson (JNJ), Coco Cola (KO), American International Group (AIG), Intel (INTC), and Caterpillar (CAT).
Staples (SPLS) is launching free-standing copier store to compete with Kinko.
Xerox (XRX) has had a fairly good year, but some analysts think it could rise another 25%.
Despite a share price rise in 2006, stock in Toyota (TM) is likely to go higher this year as it takes share from Ford (F) and GM (GM). The shares still have a lower PE than Honda (HMC).
Public company TV operators with stations in mid-sized markets are probably not impacted as much by the internet as those in major metros. And, private equity may have an appetite for stocks in this sector including Heart-Argyle (HTV), Gray TV (GTN, SInclair (SBGI), Lin (TVL), and Nexstar (NXST).
Private equity’s attention is moving to Europe. There may be a $50 billion deal there this year.Europe stocks trade at a PE below their historical average. Some large caps could be targets based on certain metrics. These include Barclays (BCS), Deutsche Telekom (DT), Deutsche Bank (DB), ABN Amro (ABN), Koninklijke (KPN), and Swisscom (SCM).
SAP (SAP) may not be giving a great deal of market share to Microsoft (MSFT) and Oracle (ORCL) despite its recent earnings warning.SAP may be able to hold down spending and get some mid-market products out, which could help its fortunes.
Of the Dow stocks, four increased dividend payouts last year: Altria (MO), Home Depot (HD), McDonald’s (MCD), and Microsoft (MSFT). Six other Dow members increased payouts, but they will not hit the market until 2007: AT&T (T), Disney (DIS), General Electric (GE), Boeing (BA), Intel (INTC), and Pfizer (PFE).
Several large pharma companies have breakthrough drugs coming this year: Novartis (NVS) has glavus for diabetes, Merck (MRK) launched a similar drug called Januvia, GlaxoSmithKline (GSK) launched a breast cancer drug called tykerb, Wyeth (WYE) will bring out antidepressent pristiq, and Sanofi-Aventis (SNY) will launch acomplia for losing weight.
Barron’s annual roundtable participants made their 2007 picks. For John Neff: Huntsman ((HUN), YRC Worldwide (YRCW), Citigroup (C), and DR Norton (DHI). For Art Samberg: Monsanto (MON), Research In Motion (RIMM), Tenaris (TS), Foster Wheeler (FWLT), Cheasepeake Energy (CHK), XTO Energy (XTO), Everest Re (RE), and Axis Capital (AXS). For Oscar Schafer: CBS (CBS), Tyco (TYC), Flamel Tech (FLML). For Meryl Witmer: Chaparrel Steel (CHAP), Walter Indusries (WLT), Deckers Outdoor (DECK). Felxi Zulauf picks: Newmont (NEM), Gold Fields (GFI), Harmony Gold (HMY), Glamis Gold (GLG), Llhir Gold (LIHR). For Scott Black: Apache (APA), Bronco Drilling (BRNC), Home Solutions (HSOA), Altra Holdings (AIMC), Arrow Electronics (ARW), and Severn Banc (SVBI).
Apple’s (AAPL) goal of selling 8 million iPhones for fiscal 2008 look ambitous. The phone is expensive, and the purchase of the handset requires a wireless service plan with AT&T (T). The new product will probably not have much impact on Blackberry sales (RIMM) which tend to be to corporations. The product could take market share from Motorola (MOT), Nokia (NOK), Samsung, Palm (PALM) and Sony-Ericsson.
Dreyfrus Premier S&P Stars Opportunity Fund was profiled in Barron’s. Its largest holdings: Manitowoc (MTW), Celgene (CELG), AES (AES), FactSet (FDS), CenturyTel (CTL), Coach (COH),Ingram Micro (IM), AK Steel (AKS), ETrade (ETFC), and CH Robinson (CHRW).
Trucker YRC (YRCW) has been down on concerns about the economy, but with cash flow building for 2007, the shares could rise 50%.
Douglas A. McIntyre
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