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Stock picks by the pros
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October 14, 1999: 12:27 p.m. ET
Enthusiasm for North Fork Bancorp, Apple, Houghton Mifflin, Cabletron
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NEW YORK (CNNfn) - An educational publisher, a financial services company and a computer manufacturer, among others, got the thumbs up from money managers and analysts Thursday. Here are some of the stocks recent guests on CNNfn are buying and why:
James Awad, Small Cap Value Fund manager at Awad and Associates, admits that this is "the worst quadrant to be in. The decline line has been negative since April of 1998. So, while a small number of stocks have done exceedingly well ... and dominate the averages, you've really had a stealth bear market over the last 18 months."
Among the picks Awad thinks will do well are educational publisher Houghton Mifflin (HTN) and North Fork Bancorp (NFB).
Awad likes Houghton Mifflin because "education will be a theme in the next presidential election. It's one thing that this country is not doing well enough. Several states are going to be adopting new textbooks. This company has spent a lot of money to prepare, so you're going to go into a period of rising revenues, declining costs and powerful positive profit growth. And it's selling at 13 times forward fourth quarter earnings."
"North Fork Bancorp stock is selling at about 20. We think its fair value would be about 30. But meanwhile, you're getting a 3 percent dividend yield and it's selling at 10 times earnings. Demographically, it's a very attractive area. So, your risk in buying North Fork is that you're a little bit early and the market doesn't care about value stocks for a while. And of course, in a period of rising rates, financial stocks don't do particularly well. But," Awad concludes, "if you buy it and put it away, you'll end up making 50 percent from current levels over a 12 to 18 month period."
"Despite the run it's had," says computer analyst Michael Kwatinetz of Credit Suisse First Boston, referring to Apple Computer (AAPL), "its peers are still at a 30 percent premium on their valuation. So this could be up 50 percent or more over the next 12 months."
Market analyst Larry Wachtel of Prudential Securities likes tech stocks, despite the oft-bumpy ride in that area. "I think the semiconductor cycle is in place," he adds. "I think some of the enterprise software stocks like BMC Software (BMCS) look good." Still, he admits, "I'd be a selective buyer."
Coming up at 2:45pm ET on CNNfn:
Robert Reitzer, portfolio manger at Bear Stearns, discusses two of his stock picks. Merck & Co. (MRK) is a good opportunity, he says, due to the pharmaceutical company's good earnings growth. They also, says Reitzer, "have the best pipeline in the drug industry."
Investors also might want to look at networking company Cabletron Systems (CS), according to Reitzer, as "earnings will explode in the next two years." He calls the company, which manufactures LAN and WAN connectivity hardware, "probably the up and comer of the (networking equipment manufacturer) group."
The views presented here are solely those of the analysts quoted. They do not represent the opinions of CNNfn on whether to buy or sell shares of a particular stock.
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