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Stock picks by the pros
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August 23, 2000: 3:13 p.m. ET
General Motors, Global Marine, Ensco, Pharmacia, and Goldman Sachs rate
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NEW YORK (CNNfn) - Market analysts took a look at stocks in the retail, banking, technology and oil sectors for their top picks Monday. Sears Roebuck, Chase Manhattan, Ensco International, Juniper Networks and Conoco were some of the top draws.
While the markets swayed in early Wednesday trading, recent guests on CNNfn commented on the stocks they are buying and why.
 "Energy stocks are very volatile. We consider them to be the tech stocks of the energy industry. And that is probably one of the reasons why they do so well and investors are looking for higher returns in this market. There is something in comparison with technology and these stocks can provide those returns," said Jordan Horoschak, oil analyst, S&P Equity Group.
"My favorite sector in the energy industry - we're bullish on the industry as a whole -- are the off shore drilling oil service stocks," he said. "Companies like Global Marine (GLM: Research, Estimates), Ensco International (ESV: Research, Estimates), Rowan Companies (RDC: Research, Estimates). These off shore stocks will double their earning from 2000 to 2001 and should continue to benefit from higher oil prices," Horoschak said.
"Investors are very hesitant about oil prices at $30 a barrel. No one believes $30 a barrel is sustainable in the long run. So they question why would I buy a big oil company stock in front a commodity price risk," he continued. "So I think what will move these big oil companies is oil prices coming down and then stabilizing. When they're comfortable with oil at $24 a barrel and it looks stable that is when these companies will benefit stock wise."
 "Juniper Networks (JNPR: Research, Estimates) is at a new 52-week high now. I like Juniper because of the industry it's in - communication equipment. The management team is very well seasoned. Their products are quite easy -- not easy to manufacture, but easier than, say, implementing a software system. So there's fantastic growth opportunities for this company," said John Eade, analyst, Argus Research. "It turned profitable much faster than we or the rest of the street had anticipated. It's only been public for about a year now. I think it's a company that you put in your portfolio and you don't think about for two or three years. And you let it grow because it's generating phenomenal growth right now in a great industry."
Eade said that he likes FleetBoston (FBF: Research, Estimates). "The Fed is moving to the sidelines," he said, adding, "50 percent of the regional banks businesses as a rule are still related to the direction of interest rates. We think interest rates are headed lower. Capital markets remain very active. Fleet is in that business. They have an investment banking division, too, now. So the shares are quite cheap at about 13, 14 times earnings."
Eade also said that he likes Pharmacia (PHA: Research, Estimates).
 "My favorite stock in retail sector is Federated (FD: Research, Estimates), which has really been hammered. They apparently made a big mistake with the finger hut deal and they've got some credit problems with that division. But the valuation of the retail stores themselves that make up primarily Federated are extremely cheap I think. Even if they wrote off all of Finger Hut, which I expect they won't. They would still be a profitable company going forward, and I like it both technically and fundamentally at these levels," said Bill Meehan, market analyst at Cantor Fitzgerald & Co.
"I think General Motors (GM: Research, Estimates) has been up about 16 percent or so over the past several weeks. So it appears to have bottomed, and I think there's very substantial upside potential. I think I'm looking at similar things to what Mr. Icahn has, he's just filed that he's going to take some position, we don't know exactly how large. There are a lot of assets, a lot of value in the company. And I think it's discounting at these prices a recession a day after tomorrow," Meehan said.
"I just started recommending Sears Roebuck (S: Research, Estimates) about a week or two ago because again I think it's probably seen the worse. But the real winners on the Internet are going to be the WalMart.coms, the Sears.coms, and the other businesses.coms that have recognizable and trusted brand names."
 "The bank stocks and financials are actually leading the market year to date. I tell you six months ago it was a totally different picture. We were in the hole. The financials underperformed last year and we started poorly, so this is a very nice turnaround," said David Berry, banking analyst at Keefe Bruyette & Woods. "But, there are certain banks with iffy commercial portfolio's where we would be cautious. There are some regional banks that we like, too. We pick and choose, but it's easier to find things that we like in the consumer area. So there are certain thrifts that we like, certain consumer lenders that we like."
"We think the outlook for the broker dealers looks real good going into the second half, particularly with the rate environment clearing up as you mentioned. There's every reason to think that the underwriting calendar will be robust as we get past Labor Day. And Goldman Sachs (GS: Research, Estimates) is a leader in merger and acquisition advisory and that's a business which has stayed strong and is likely to continue to be quite strong particularly in Europe," Berry said.
"Chase Manhattan (CMB: Research, Estimates) is a misunderstood situation. I think a lot of investors still view it as a commercial bank and it's really crossing over to be more like an investment bank through its acquisitions of H&Q last year. Flemings just closed a few weeks ago and what is an undertold story, Chase has already made huge strides into Wall Street space without even doing the acquisition. Chase is already one of the top 10 M&A players. It's a leader in the underwriting in the bond business and it still trades with a lot of commercial bank anxieties rather than the investment banking growth story," he said.
"The difference I would point out between J.P. Morgan and Chase is that Chase has a broader franchise than JP. It's a larger company. It touches more corporate clients. It also has some very valuable businesses, which I think the street overlooks today. They have an important securities processing business as large as State Street Corp. And they have enormous and extremely valuable private equity business, Chase Capital Partners," he said.
 "We had a pretty tight market for crude oil and for refined products around the world and that's going to be extended into 2001 as well. More specifically, I think that we've seen a change in policy within OPEC over the last couple of years that -- and that these guys are really becoming increasingly concerned about losing their place in a global economic hierarchy and they're trying to target $25-to-$27 oil. Now that's fine and dandy. We want to be able to have higher prices, but you have to have fundamentals that are supportive of that level of price and in year we've had them. We've had strong demand growth, which will be up about a million barrels per day. It has increased supply significantly. We have low inventories today and that will continue into 2001 in that demand growth will be have strong next year, maybe the strongest in 20 years or so. So the outlook for crude oil is very positive -- $25-to-$27, say, (a) good number for next year. Quite frankly, the real concern in the global petroleum system may not be in crude oil, but in refined products. At least that's our view," said Doug Terreson, of Morgan Stanley Dean Witter.
"We continue to be positive on the big integrate oils. BNP stocks were very positive there as well," Terreson said. "But in my area, the integrated oils do represent good value in my opinion. More specifically, we upgraded Chevron (CHV: Research, Estimates) and Exxon (XOM: Research, Estimates) recently. Those are good names that we think have 10 to 15 percent upside in the levels. The name that I'd put money to work in this morning first is Conoco (COCB: Research, Estimates). Great fundamentals, great management team and great valuation. We think that stock can get up to the $32-to-$33 per share level by the end of this year. That's our favorite."
-- compiled by Lucy Banduci and Alexandra Twin
* Disclaimer 
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