Stocks we love
It's that time of year again: Crack open the champagne, rip into a heart-shaped box of chocolates and call your broker. Here are 5 stocks you could fall in love with.
By Jessica Seid, CNNMoney staff writer

NEW YORK (CNNMoney.com) - February 14 is just around the corner and, while others are contemplating love and commitment, we've been carefully selecting stocks that won't leave you jilted at the altar.

For the past four years, we've run stock screens around Valentine's Day to identify companies worthy of a serious commitment. Our goal: to find stocks with histories of healthy earnings and sales growth, forecasts for strong business fundamentals, reasonable valuations and clean balance sheets.

To all the stocks we've loved before...
Stocks we love: 2005
Stocks we love: 2004
Stocks we love: 2003
Stocks we love: 2002

So far our picks have delivered more than a dozen red roses. The five stocks cupid's arrow pierced in 2002 are up 93 percent, on average, since we chose them. Our sweethearts from 2003 have gained an average of 29 percent. The ones that made us swoon in 2004 are up 32 percent And the average increase for last year's stock darlings is 14 percent.

So we've decided to put our portfolio matchmaking skills to the test once again. Forty-five stocks made it through our initial selection process and we decided to focus on five that represent a cross section of the economy: Apple Computer Inc. (Research), Abercrombie & Fitch Co. (Research), Smith International Inc. (Research), Hansen Natural Corp. (Research) and WellPoint Inc. (Research).

Take a bite out of this

Why would you want chocolate for Valentine's Day when you can get a piece of Apple? The tech darling recently delivered another blowout quarter with revenues and earnings that beat expectations and introduced a new iPod nano, which sells for a discounted price.

But Apple said it is expecting revenues of $4.3 billion for the current quarter -- below a Wall Street forecast of $4.6 billion -- and earnings of 38 cents a share including a charge of 4 cents for stock compensation. Excluding the charge, the earnings guidance falls short of Wall Street forecasts of 48 cents for the current quarter.

"Expectations with Apple are very high; when you own 70 percent of the market, in the case of the iPod, you are challenged with being able to meet those expectations in terms of growth," said Michael Gartenberg, vice president & research director of Jupiter Research, a market research firm.

Even still, analysts expect both revenues and earnings to be up nearly 50 percent for the year ending in September, making this a good time to fall in love with a healthier alternative to bon bons.

Sexy, preppy, cool

And speaking of Apple, Michael Kramer, the former CFO of Apple Retail, became CFO of Abercrombie last July. A move that made sense to analysts because Apple's stores, like Abercrombie's, are all about the in-store experience.

And the emphasis has paid off handsomely. Abercrombie, known for hiring guys to hang out shirtless in its stores during the holidays, seems to have found its niche among mall retailers.

"They aren't trying to be all things to all people; they are trying to appeal to the cool kids," said Pamela Nagler Quintiliano, an analyst with W.R. Hambrecht & Co.

The company is also pursuing a slightly older customer base with its newer Ruehl brand and plans to embark on an international expansion strategy, giving analysts a reason to expect earnings to grow 47 percent this fiscal year.

Making it only fitting that a sexy company like Abercrombie would be "one of those names you want to have in your portfolio," according to Quintiliano.

How deep is your love?

Smith International makes drill bits, drilling fluids and provides drilling-related services for the oil and gas industry. Its M-I unit sells fluids used to cool and lubricate drill bits and prevent pipes from clogging -- making it a very valuable player in the field.

Additionally, Smith generates more than half its revenue and income from international and offshore deep water drilling, which will be "the two most secular and consistent spending areas by the oil industry in the next several years," according to Jim Wicklund, an analyst with Banc of America.

With oil prices projected to remain high, "we see this company as being well positioned, both from a geographic perspective and from a product line perspective," Wicklund wrote in a research note.

Other analysts agree, forecasting earnings will jump 42 percent this year as sales rise 22 percent.

Move over Red Bull

The vast majority of Hansen's business is focused on its energy drink, Monster, the No. 1 seller among 16-ounce offerings. Not a bad product to have under your belt when the energy drink industry is growing 60 percent annually and is surpassing $2 billion in domestic sales.

Analysts expect earnings to rise 45 percent in 2006 and if energy drinks stay hot, which seems likely, Hansen is poised for an effervescent 2006.

On the downside, the threat of increased competition, especially from Coke's Full Throttle and Pepsi's SoBe, could mean Monster's market share could fizzle.

But Hansen's small-company marketing style may give it an edge. Its combination of guerilla marketing and event sponsorship, such as the Vans World Tour, have helped it reach its core customers: young guys.

"The most successful brands, outside of Red Bull, are the most edgy, innovatively marketed ones," Scott Van Winkle, an analyst with Boston brokerage firm Canaccord Adams, wrote in a recent report. "We suspect this has been the Achilles heel of market leaders Pepsi and Coke, which are most associated with broadly recognized and accepted mass market brands."

Can you feel my heart beat?

WellPoint was formed through the 2004 merger of Anthem and WellPoint Health Networks. In 2005, it acquired WellChoice, parent of Empire Blue Cross Blue Shield, and became the best known provider of health insurance and services, primarily under the Blue Cross and Blue Shield names.

Last quarter, WellPoint said profit rose sharply, thanks to an increase in membership and lower costs, and boosted its 2006 profit outlook. Analysts expect revenue to rise 25 percent in the current quarter and 29 percent this year.

The health insurer is "poised to provide double-digit earnings growth from a combination of price increases in line with medical cost inflation, additional cost cuts related to the Anthem merger, and growth in segments like its national accounts business," Paul Newsome, an analyst with A.G. Edwards & Sons, wrote in a research note.

"They're doing all the right things," Newsome said.

That seems to be the consensus: 18 analysts rated WellPoint a "buy" or "strong buy" while five have it rated a "hold," according to Thomson/First Call.

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Disney is poised to move and Goldman Sachs is also an attractive bet, click here for more. Top of page

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