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Stock picks by the pros
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July 15, 1999: 1:04 p.m. ET
Praise for Home Depot, Coca-Cola, Redback Networks
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NEW YORK (CNNfn) -The nation's analysts and money managers continued the hunt for promising companies Thursday, finding value in a home improvement retailer, a beleaguered soft drink maker, and a high-speed Internet provider, among others.
Here are the stocks the latest guests appearing on CNNfn are buying and why:
A booming housing market has helped profits at home improvement retailer Home Depot (HD).
But that's only one reason why Patricia Chadwick, director of U.S. equities at Invesco, recommends the stock.
"Obviously, the housing market has benefited them, but they're also doing other things," Chadwick said. "They're also selling some higher margin products, and you can go in and get the upscale products that you need. This company also has done some amazing changes in the last few years: getting their working capital down relative to sales, getting a better return on their investment."
Looking ahead, Chadwick foresees Home Depot's earnings growing 25 to 30 percent a year.
Shifting sectors, Chadwick likes Citigroup (C), in part for the financial services company's ability to profit as overseas markets recover.
"I think that, globally, investment banking is going to be a huge opportunity for the business," Chadwick said. "We're just seeing a huge amount of activity, and I think that falls right into benefiting the large brokerage firms."
Doug Lane, beverage analyst at Merrill Lynch, says the worst may be over for Coca-Cola (KO), whose second-quarter earnings were forewarned to be less than anticipated, partly due to a recent European contamination scare.
Coca-Cola is "in an industry that's really in its infancy as far as half the world's population is concerned," Lane said. "So, I think that investors understand the long term growth prospects for Coca-Cola are very much intact and it's a very exciting story. We're fully feeling the impact of the global meltdown. Now's the time to the look at the stock, particularly if you have a two- or three-year time horizon."
Doug Lane talks Coca-Cola from Merrill Lynch's trading floor
Annette Geddes, portfolio manager at M.D. Sass, calls communications equipment provider Redback Networks (RBAK) the next Cisco Systems (CSCO), a company whose shares are up 107 percent in the last 52 weeks.
"They provide high-speed access to the Internet," Geddes said. "They've got an 18-month lead on anybody else. Their revenues have been doubling every year. They have customers like America Online (AOL), GTE (GTE) and Qwest Communications (QWST)."
Shifting sectors, Geddes recommends Steven Madden Ltd (SHOO), a maker of women's footwear.
"Outside of the athletic shoe market, this is the fastest-growing segment in the shoe industry --and they have their own stand-alone stores, plus they contract into department stores," Geddes said. "Great fashion concept."
Shawn Johnson, director of equity research at State Street Global Advisors, says buying shares in Anadarko Petroleum (APC) is a sound way to capitalize on rising natural gas prices.
"Historically, when you look at spikes in the natural gas price, this stock has been the most leverage to that phenomenon," Johnson said. "So that's been our top pick for about the last two months or so now in the energy sector."
Johnson also recommends MCI WorldCom (WCOM), saying it's time to buy the long-distance telephone provider.
"The short-term folks that are worried about earnings are providing us long-term investors some great buying opportunities," Johnson said.
The views presented here are solely those of the analysts quoted. They do not represent opinions of CNNfn on whether to buy or sell shares of a particular stock
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