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Stock picks by the pros
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December 28, 1999: 2:42 p.m. ET
Texaco, Chevron, Home Depot, Disney, Citigroup head short list
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NEW YORK (CNNfn) - While equity analysts and money managers continued to name tech stocks among their top picks, several others came in for praise, among them an oil services company, a biotech pick, and two retailers.
Also mentioned were a handful of out-of-favor "household names” stocks.
Here are some of the stocks recent guests on
CNNfn are buying and why:
"The players that are doing really well,” says Matthew Warburton, oil analyst at Warburg Dillon Read, of oil and oil-services related companies "are the ones that have the upstream bias in their exploration production. Look at Texaco (TX). Their earnings go up by about 10 percent on an annual basis. We’d expect them to show one of the strongest recoveries when we see the fourth quarter numbers coming out in the late part of January.
Warburton also likes Chevron (CHV), citing "earnings growth. But we’ve got the sector seeing a 28 percent uplift in earnings next year. So there are a number of names that we would consider good value.”
His last pick is oil services company Marine Drilling (MDCO), although he notes that this might be a stock for the long haul, saying "it’s really 2001 when we’ll see the price response from the recent rally in crude prices.”
"The growth fund that I run has a mid-cap mantra,” says Brian Clifford, portfolio manager of Sun America Asset Management. "We focus on companies between $1 and $8 billion in market capitalization, so it’s not the Ciscos and the Dells and the Microsofts that I own. It’s more names like Citrix (CTXS) and JNI (JNIC). Within the tech group, we really have seen the market broaden out. A lot of people talk about how narrow the market is, but I think within the technology sector, we have seen the performance spread out in the mid- and small-cap sectors.
Clifford likes Citrix because "they continue to execute. They hit their earnings quarter after quarter. They have a new CEO on board. They do architecture solutions for small and medium sized businesses, and they are also a way to play the ASP, which is a buzzword, applications service providing, which is hosting applications in an off-site center. It lowers the overall costs of computing for small and medium size businesses.
"The president of Citrix is chairman of an industry consortium in ASP and they are a leader in the space. It’s an exciting technology sub-sector.”
Clifford also likes biotech firm Millennium Pharmaceuticals (MLNM), saying "We’ve owned [this stock] all year. Millennium is a genomics play. They are a leader in the field of genomics and they continue. They have a platform technology that they continue to license to the major pharmaceuticals, including a recent deal with Bristol-Myers (BMY).”
"In the biotech group, the AMEX Biotech Index is up over 100 percent. I think it’s up 118 percent year to date. That’s one of those groups that haven’t gotten a lot of attention. People are more focused on the Internet and these red hot tech stocks, but underneath that, there have been some hot performing sectors and the biotechs would be one of them. I think next year is going to shape up to be another great year for the biotechs. We have got a couple catalysts including the mapping of the human Genome, which is going to take place in the first half of next year, which I think is a big catalyst for a lot of these names, and Millennium has got to be considered a leader.”
"I think if [Greenspan] is gunning to slow down economic growth,” says Patricia Chadwick, director of U.S. equities for Invesco, "he may be barking up the wrong tree...I would argue kind of cynically: If he really wants to shut this economy down, he ought to spur some inflation, and people would go, whoa, I can’t really afford that [product] more.” [678K Quicktime movie]
"Deflation, [of course] is not good for everyone. [It’s] bad for those companies who count on it for their top line, but great for the companies that can cut their costs: Wal-Mart (WMT), for instance. It is great for Wal-Mart. Wal-Mart thrives on providing the lowest-priced items to consumers. They will cut their costs with vendors. It’s great for a Home Depot (HD), great for a G.E. (GE), great for lots of companies with [purchasing] clout.”
"[right now, what we’re seeing is a huge] disparity between some of the big tech stocks and the rest of market,” notes Tony Dwyer, chief market strategist at Kirlin Holdings. "Once selling takes place in some of the higher tech [areas], along with profit taking in January, I think it will broaden out. The fundamentals of a lot of stocks -- ‘household name’ types of stocks -- have only gotten better, yet their stocks are down sometimes 20, 30, sometimes 40 percent from their 52-week highs, and that creates an opportunity that’s ripe for a broadening in the market.”
"I think you can come away from some of these big tech names for a little while and go into some household names. I think Disney (DIS), for one, looks terrific in here. It’s got an asset value, by most analysts’ estimates, of about 35 bucks a share and it’s trading in the mid-20s.”
"I think Merck(MRK) is also cheap in here, they’ve gotten an extension on some of their drugs. You have to look at valuations [on these stocks] relative to market. Merck does not get much cheaper than this. They have also had some upward revisions. The company in mid-December, guided analysts a little bit higher on their numbers, so - that is not going to be a disappointing quarter. They would not guide analysts higher and then show up with a disappointing quarter.”
Dwyer’s last pick is Citigroup(C). "It’s a conglomerate and again, it’s cheap; the interest rate environment...[has been] pretty bad for financial stocks. However, earnings should be really good at Citigroup and again, it’s the dominant player market leader.”
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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