|
Stock picks by the pros
|
 |
August 24, 2000: 4:51 p.m. ET
Palm, Bank of New York, Alcoa, Broadcom, and Texas Instruments rate
|
NEW YORK (CNNfn) - Market strategists and analysts took a look at stocks in the financial, steel, wireless, energy, food, technology, and drugstore retail sectors for their top picks Thursday. Wal-Mart, Ispat, PMC-Sierra and Global Marine were some of their top draws.
While the markets were gaining, recent guests on CNNfn commented on the stocks they are buying and why.
 "We agree that technology is probably the greatest area of growth both in biotechnology and information technology, but I think people need to balance that to dampen the volatility, and one of the areas to look at is in the natural resources area," said John Davidson, chief investment officer, Orbitrex Group of Funds.
"We look at sectors and across national borders. One of the things we're seeing is probably more growth in Europe than in the U.S. and more growth in Asia, maybe ex-Japan, than we have. And Asia, for instance, is a very strong consumer of natural resources. Both energy and the metals and that is an area of growth that I think is not factored in," he said.
"In the steel and metals, I think there are great opportunities in companies like Alcoa (AA: Research, Estimates), a very well-run domestic company, Ispat (IST: Research, Estimates), a European steel company, and Pohang Iron & Steel (PKX: Research, Estimates), which is a Korean steel company," he said.
 Vik Mehta, mobile Internet analyst, Goldman Sachs, is bullish on Palm (PALM: Research, Estimates). "Most of us know Palm as the devise we carry around or something like that. If you think what the company does, it's actually something that is fairly complex. They sell you a device that gives you wireless access, in some cases, and they put all the software and some of the content on to it. That is not easy.
"We've come up with several different reason why we think that company is attractive and especially as you look at the product lineup of where the company goes over the next several years, we think it offers tremendous opportunity for investor along the way," he said. "For example, they will launch more significant initiatives into the enterprise space that more tightly ties this PDA right into everything that you do in the enterprise into the corporation. They also, at some point within the next two years, will integrate voice communication into some of their devices, which will also be an important boost to what these devices could be in our day-to-day lives.
"I feel very comfortable with the fact that a company that can create products one after the other that are basically going to hit the ball out of the park every single time it is pretty rare," Mehta said.
 "Financials, the energy stocks. I think certainly selected technology areas will also do well, because one of the things the Fed likes to see is of course corporate America spending money on productivity enhancing technology. That obviously bodes well for those tech stocks that provide the goods and services that are obviously very much in demand," said John Shaughnessy, chief investment strategist at Advest.
"AIG (AIG: Research, Estimates) is a multinational financial company. They're in the process of acquiring another insurance company, HSB, which would be accretive to earnings next year. You have the potential to grow earnings at about 15 percent a year. You get a reasonable P/E ratio. And frankly, quality multinational financial stocks. And you get a modest current yield as well. So we like the stock now and we continue to like it," Shaughnessy said.
Regarding the banking sector, Shaughnessy said, "Bank of New York (BK: Research, Estimates) is again the beneficiary. Once interest rate concerns begin to abate, obviously the bank stocks in this country will be the beneficiaries of that. But definitely, we like Bank Of New York. You get a yield of almost two percent and reasonable valuation. And certainly it will certainly benefit as interest rate concerns abate.
"OPEC in a way is encouraging other countries to spend money to try to develop additional reserves to reduce their dependence on OPEC's decision making process," he continued. "So we're going to see spending on oil and gas drilling in the United States and other parts of the world will be picking up late this year or into next year. And Global Marine (GLM: Research, Estimates) is just one of the vehicles that investors could benefit from the rising spending. So they have the potential to show very strong earnings growth in the year 2001."
 Retail and food analyst Asma Usmani, of Edward Jones, discussed Wal-Mart and why she thinks Albertson's (ABS: Research, Estimates), the No. 2 U.S. grocery chain, issued an earnings warning this week. "Alongside Wal-Mart (WMT: Research, Estimates), Kroger and Safeway of course are having an impact on Albertson's, but Wal-Mart's been very aggressive in the super centers. Just in the year 2000 they're looking to open 165 super centers and a super center basically is a discount store with a grocery store attached and they've actually been taking some market share away from Albertson's in certain markets. If you look at the Wal-Mart's numbers, the recent numbers they've been seeing phenomenal growth within the food division. They've been growing the food sales in excess of 30 percent. This is in an environment where the food retailers are seeing modest sales growth," Usmani said.
"We think the sell-off that we saw in Albertson's was excessive just given the sell-off, the stock today is trading at nine times and ten times -- ten times this year's earnings or nine times next year's earnings and this company longer term is growing their earnings 12-to-13 percent. So we would encourage investors to use today as a great buying opportunity," said Usmani.
"Even though Albertson's down and the index is down from the 52-week high. Year to date, both the grocery industry and the drugstore industry are actually up. Year to date the grocery industry is up 9 percent and the drugstore industry is up about 12 percent and we've been seeing a lot of fear in the marketplace concerning interest rates and impact this will have on consumer spending. Consequently, there's been a lot of money that's been moving over to some of the staple companies like grocery chains and drugstore retailers," Usmani said.
"We have a buy on Walgreen (WAG: Research, Estimates) and a strong buy on CVS (CVS: Research, Estimates). Both of them are benefiting from the aging of the population and the increased demand in prescription and more and more of us paying -- more and more of the consumers having their drugs paid by third party payers which makes us as a consumer more likely to have the prescription prescribed," Usmani said.
"I think one thing that happened in the summertime everyone was focusing on cellular phones. There was a little bit of a 'Holy mackerel, it's not doing what we thought with these really high forecasts.' And Motorola said one thing and Ericcson said all over. Now all of a sudden, four weeks later, what are we thinking about? We're thinking about Christmas, back to school, PCs. And who makes PCs? Well, the Compaqs and Dells. And what goes into them? Intel chips. Intel (INTC: Research, Estimates) hitting a new high. They have an Intel developer forum going on. They're coming out with a new product. And all this stuff that everyone was going down no company has come out and said that. So, bang! Here we go again," said Jack Geraghty, semiconductor analyst from Gerard Klauer Mattison.
"Texas Instruments (TXN: Research, Estimates) is going back to our cellular phone story. That's the major vehicle to participate. They make a digital signal processor. It's got 60 percent of the cell phone market doing well and concentrating on that. Excellent stock. That's probably one you can own for 10 years," Geraghty said.
"Broadcom (BRCM: Research, Estimates) is a risky one in the sense that very high multiple but going to set-top box and a lot of the new optical technology. This one sells at 150 times next year earnings, but it's doubling ever year in volume in revenues. It is risky but it's growing very quickly," he said.
"PMC-Sierra (PMCS: Research, Estimates) makes chips that will expand Internet usage. Same thing high multiple strong stomach hang on but you can trade it," he added.
"Analog Devices (ADI: Research, Estimates) is like the junior Texas Instrument. Secondary position there, very good analog perspective and a lot of things related to the Internet and cellular phone, good well managed company," Geraghty said.
-- compiled by Lucy Banduci and Alexandra Twin
* Disclaimer 
|
|
|
|
|
|
Track your stocks
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
