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Stock picks by the pros
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August 14, 2000: 3:45 p.m. ET
EMC, Xilinx, Dell, Disney, Ciena, Exodus, Bristol-Myers earn mention
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NEW YORK (CNNfn) - Analysts and market strategists took a look at stocks in the health care, technology, telecom, finance, media, energy, and insurance sectors for their top picks on Monday. Pharmacia, National Commerce Bancorp, Viacom, Anadarko Petroleum, Verizon and Texas Instruments were among their favorites.
As the markets made modest gains in late afternoon trading, recent guests on CNNfn commented on the stocks they chose, and why.
 "People have been focused on tech and telecom and all the big growth areas, but you can't have a portfolio that's all tech and telecom. And I think the energy story's a good one because a lot of people think prices have spiked up which they have, but will be collapsing back down which we think they won't," said Kevin Bannon, chief investment officer, Bank of New York. "Growth seems to be picking up around the rest of the world. That means demand for energy is going to be there and I think prices might be stickier than people think.
"Exodus (EXDS: Research, Estimates) has been a wild ride, but in what I think is going to be a great, great growth area," Bannon said. "This whole idea of web hosting as companies try to come up to speed on the Internet. They need to go outside for help. Anyone who can provide that solution will do very, very well. And Exodus is one of the leading companies there."
Bannon's second pick is Ciena (CIEN: Research, Estimates). "It has also been volatile. Done well of late, but fiber optics is one of the fastest-growing fields in this whole area. There's been a lot of consolidation. Ciena is one of the remaining independent companies which we think has very, very bright prospects," he said.
His last two picks are Anadarko Petroleum (APC: Research, Estimates) and BP Amoco (BPA: Research, Estimates). "The common them there is both of them have a lot of exposure to natural gas, which will be a big play in energy. They've done pretty well. But I think if you're a patient investor and are looking out a couple of months, you'll do well in them," Bannon said.
 "I think clearly the trend [in media companies] is: bigger is better, said Linda Bannister, analyst, Banc of America Capital Management. "We have seen a lot of consolidation in the media sector, and if we get any kind of relaxation in ownership rules, we're likely to see more consolidation. These companies want to be the one-stop shop for major advertisers, and I think really that is what's driving the consolidation and it's also leading to a lot of other synergies."
"We really like the large cap media companies, because of their proprietary content, their strong brands and their distribution. So the companies that we are recommending today are companies like Disney (DIS: Research, Estimates), Viacom (VIA: Research, Estimates), and the new Time Warner (TWX: Research, Estimates)-AOL (AOL: Research, Estimates)," Bannister said.
"Clearly, 'Millionaire' has helped Disney through the ABC television network, but longer term, we like Disney, because we think the company's new focus on return-on-investment is the right focus for the company. They have really looked at costs throughout the whole organization, and ways at increasing cash without investing a lot of additional money," she said.
"Viacom is definitely a 'must buy' for major advertisers. We think cash flow growth at the company is going to be strong. Mel Karmazin is a great leader and we really like that stock," Bannister said.
"Time Warner-AOL is the new media company that everyone is going to have to watch. This is a new business model. It's taking an 'old media company' with a 'new media company' - taking some great brands and combining it with some great distribution on the Internet. So we think they are going to be able to realize a lot of synergies; we think it's going to have the highest cash flow growth of the sector; and we think the stock is poised to outperform over the long term," she said.
 When asked about drug companies and the Democratic National Convention, analyst David Katz of Matrix Asset Advisors said, "We think that the rhetoric is going to be fairly negative and that is going to push prices of drug companies modestly lower over the short term. That's a very good time to be adding to positions. We think a year or two from now, not a lot is going to change and the drug companies are good growth businesses at more reasonable prices."
"A company like Bristol-Myers (BMY: Research, Estimates) we think is the cheapest in the group. Pharmacia (PHA: Research, Estimates) is also a very good company. Abbott Labs (ABT: Research, Estimates) also a quality business. Whereas Eli Lilly (LLY: Research, Estimates) is still fairly expensive. The court ruling that they had last week is going to lower their earnings growth significantly. The stock still sells at about 28-to-30 times earnings."
"Verizon (VZ: Research, Estimates) is about as ugly a chart as you get," Katz said. "The stock is down recently. Some of it's a strike. They also recently had an analyst meeting and they lowered values for the next year or two, and that's really causing pressure on the stock. We think that the strike is eventually going to be settled in fairly short order, and we think the company has very good prospects. They will benefit from the 'new economy,' selling you a phone used, DSL used; yet, you're buying it at about 13 times earnings. So this is a case where you should "buy on the bad news," which is right now; a year and a half from now, you're going to be very happy."
"Home Depot (HD: Research, Estimates) has been able to defy the odds. They're a wonderful growth company. So we think they're going to make their numbers. In terms of Hewlett-Packard (HWP: Research, Estimates), we think it could be a modestly mixed number. We're not expecting anything gangbusters, but we think the stock should do OK," he said.
 "I think this improved Fed outlook and interest rate inflation outlook means the finance stocks are really the place to be. You know, this has been the best place in the Super Bowl market in the last 18 years, the best sector of 10 sectors has been finance. Within that area, the bank, the thrifts and the insurance companies have started to do well in the last three, four, five months so the technical trends are up, and I would favor stocks like National Commerce Bancorp (NCBC: Research, Estimates) which is a significant regional bank in a number of states. North Carolina and in Georgia," said Robert Robbins, chief investment strategist for Robinson-Humphrey.
"SunTrust (STI: Research, Estimates), which is a super regional in the Southeast, is also one of my favorites," Robbins said. "And they've also seen a double bottom in the stock, and it looks attractive. And then finally Jefferson-Pilot (JP: Research, Estimates) in the insurance area. And this is also a play a little bit on the super bowl market of stocks and bonds because they do annuities. And you can see all three of these stocks are more defensive in line with my view that you want to be a little careful about taking much risk at this seasonally difficult time of the year that's coming up soon."
 "Texas Instruments (TXN: Research, Estimates) is my bellwether stock, and they've talked about 435 million cell phones this year," said David Soetebier, senior technology analyst, Banc of America Capital Management.
"We had the quick change, the analog-to-digital part of the growth -- now we've got the Web enablement," he said. "We'll go forward with better Web features, extended battery lives, although to a lower voltage type device. All reasons for people that currently have phones to upgrade them. As they add features on the Internet-access site, that could be a key driver of growth. There is more saturation, but because of the tendency to upgrade, there's still a lot of growth left in cell phones."
"The Internet is basically one huge database, and people now are focusing on the amount of data that goes into storing, you know, basically text. As they add video and more graphics, the amount of storage required will jump by some huge amount. EMC (EMC: Research, Estimates) have the quality product, and for an Internet company, when their database is down, they are out of business. So they are willing to pay up for that quality product. So that should drive EMC for the foreseeable future," he said.
"Xilinx (XLNX: Research, Estimates) makes programmable chips. So whatever is the hot product, those companies need to get that product to market quickly as possible. So they go to Xilinx to get the programmable chips -- that gives them a way to get that product out on a very timely basis," Soetebier said.
Other picks include Dell (DELL: Research, Estimates) and Automatic Data Processing (AUD: Research, Estimates).
-- compiled by Lucy Banduci and Alexandra Twin
* Disclaimer 
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