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Michael Sivy Commentary:
Sivy on Stocks by Michael Sivy Column archive

Stocks: Rating the winners of 2006

Ten of the Sivy 70 returned at least 30 percent last year. Here's how those stocks shape up for 2007.

By Michael Sivy, Money Magazine editor-at-large

NEW YORK (Money) -- Despite all the worries, last year turned out to be quite good for blue-chip stocks. Although prices were flat early in 2006, stocks rallied strongly in the second half.

For the year as a whole, the S&P 500 index rose 14 percent. Add in dividends, and the total return was more than 15 percent. That's considerably better than the average year.

Many of the stocks in the Sivy 70 were big winners during the rally. Ten stocks on the list, in fact, returned at least 30 percent for 2006.

What does 2007 hold for the economy, the stock market and blue chips, in particular? I'm fairly optimistic.

The most likely outcome, in my view, is that the weak market for housing slows the economy briefly without causing a recession. That would allow some inflation pressures to dissipate, creating a favorable environment for another advance in stock prices.

As for the stocks in the Sivy 70, here's a quick look at the prospects of the 10 companies that were top performers last year.

Comcast: Up 63%

The biggest gainer among the Sivy 70, Comcast (Charts) has benefited from robust subscriber growth. The attraction is that, unlike some of its competitors, Comcast is able to offer television, Internet access and telephone service. These advantages should continue to help in 2007, although some analysts feel the stock is now fully priced.

Cisco Systems: Up 59%

Thanks to some smart acquisitions, Cisco (Charts) has cashed in on the boom in online video, both for consumer and business use, such as teleconferencing. The stock is fairly priced but still attractive for the long term.

Disney: Up 43%

All of Disney's (Charts) businesses performed well last year, including theme parks. After its recent rally, the stock is no longer undervalued, but it's generally seen as a moderate buy.

T. Rowe Price: Up 39%

Shares of mutual fund companies benefit greatly from a rising stock market. Their fees are usually based on the assets in the funds they manage, so earnings get a big boost as fund prices move up. Shares of T. Rowe Price (Charts) are fully priced, but should continue to follow the market's ups and downs.

Merrill Lynch: Up 37%

A solid stock market has also helped Merrill Lynch (Charts), but the brokerage has also enjoyed big gains thanks to strong underwriting and merger activity. The stock is still fairly cheap and would continue to prosper in a good stock market.

ExxonMobil: 36%

Oil prices ended the year close to where they began, but leading international oil companies such as ExxonMobil (Charts) had a great year. Oil prices are unlikely to move substantially higher, but total oil consumption will continue to grow. Analysts consider ExxonMobil shares fairly priced, but the stock is still a good long-term inflation hedge.

Harley-Davidson: 36%

The premier U.S. motorcycle maker Harley-Davidson (Charts) has been one of the best-performing stocks over the past 15 years. But recent sales growth is expected to slow and most analysts rate the stock as untimely.

InterActiveCorp: 31%

Despite softness in real estate services, it's been a great year for InterActiveCorp's (Charts) collection of online businesses, such as Ticketmaster and Citysearch. And the company's revamped search engine has been a great success. The shares are reasonably priced, especially for an Internet stock, but it's still chiefly a bet on dynamic CEO Barry Diller.

General Dynamics: 30%

Demand for tanks and other military vehicles, as well as defense technology, has boosted General Dynamics' (Charts) shares. Orders will continue for the replacement of equipment used in Iraq, but analysts think overall growth in defense spending could slow.

Schlumberger: Up 30%

Schlumberger (Charts), the leading oil-services company has been a prime beneficiary of exploration and oilfield expansion as crude oil prices have climbed. But Schlumberger shares still remain moderately priced. And however oil prices fluctuate in 2007, drilling will likely keep increasing to meet growing demand.


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