DRIP INVESTOR
7412 Calumet Ave., Hammond, IN 46324.
Monthly, 1 year, $99.
Headlines you'll see in 2004
Charles Calrson: "Here are headlines you'll be reading in your local paper in 2004:
Dividend Stocks Back in Vogue
Despite the new tax plan that reduces taxes on dividends to a maximum 15%, investors didn't pay much attention to dividend-paying stocks in 2003. Indeed, through the first three quarters of the year, the 50 highest-yielding stocks in the S&P 500 index rose just 10% versus a 40% jump in non-dividend payers.
To be sure, interest in dividends tends to be cyclical; investors are much more interested in dividends when capital gains are harder to achieve. This was clearly evident during the bear market of 2000 through 2002, when dividend stocks handily outperformed non-dividend payers. When the market is strong, as it was in 2003, investors' fancy turns to growth and speculative issues.
So why will dividends return to favor in 2004? First, I don't foresee the type of gains in the stock market in 2004 that we saw in 2003. Nor do I see the types of stocks that led the market in 2003 leading in 2004. Indeed, it is not unusual during the first leg of a bull market that the most aggressive stocks lead the way. That was certainly the case in 2003 when the stocks with the poorest fundamentals provided the biggest returns. For example, according to a Legg Mason study, the stocks rated highest by Standard & Poor for earnings and dividend stability were up 12% through the first three quarters of 2003. The lowest-rated stocks, on the other hand, were up 55%.
However, as bull markets mature, money tends to rotate out of the speculative stocks into higher-quality issues. This rotation is already underway - the Dow Industrial average has handily outperformed the Nasdaq Composite since early December - and I think the rotation will continue throughout 2004. Such a rotation favors dividend-paying stocks, especially stocks offering decent yields. For that reason, I believe the real sweet spot in this market in 2004 will be growth-and-income stocks, those issues offering yields of 2% to 4%, solid dividend growth, and reasonable appreciation potential. Two stocks that fit this bill include Bank of America (NYSE BAC $79) and ChevronTexaco (NYSE CVX $84). Bank of America has rebounded nicely following its decline at the end of October. The selling was sparked by the firm's $47 billion takeover offer for FleetBoston. Wall Street is concerned that Bank of America is over-paying for Fleet. However, Bank of America has done a good job of assimilating acquisitions in the past. Bank of America yields over 4%. The dividend was raised 25% in 2003, and I expect another double-digit increase in the payout in 2004. ChevronTexaco represents a solid play in the oil sector. Oil prices have remained stubbornly high, which should translate into decent earnings for the firm. The stock yields well over 3% and has decent appreciation potential. Both Bank of America and ChevronTexaco offer direct-purchase plans whereby investors may buy the first share and every share directly from the company. For enrollment information for the two companies, call 800-842-7629.
Merck One of the Dow's Leaders in 2004
One of the worst-performing stocks in the Dow in 2003 was Merck & Co. (NYSE MRK $45). The stock is down 21%, the third-worst showing among Dow stocks. Only Eastman Kodak and AT&T have posted larger declines. Further evidence of Merck's lousy performance is the fact that the stock trades at a 16% discount to its 200-day moving average price - the largest discount of any Dow stock. For comparison purposes, 86% of all stocks on the New York Stock Exchange currently trade above their 200-day moving average price. Merck is being impacted by a variety of ills - generic drug competition, the lack of a strong product pipeline, and the general indifference Wall Street is showing big pharmaceutical stocks. However, expectations are so low for Merck that any positive news should help these shares rebound. Thus, I think you'll see the "worst-to-first" phenomenon kick in for Merck in 2004, with these shares being among the best-performing Dow stocks by the time the year concludes.
Bush Captures Second Term
I'm probably not going out on a limb on this one. I do believe, however, that the election may be closer than people believe. True, the capture of Saddam Hussein has certainly boosted Bush's popularity. However, don't forget what happened to the President's father. His popularity swelled after the first war in the Persian Gulf only to dissipate come election time. To be sure, an improving economy will certainly help the current President; his father didn't have such help. Still, even a mild reversal in the economy would not be good news for President Bush's reelection campaign. And he is vulnerable to criticism concerning his fairly aggressive spending programs and the continued occupation of Iraq. He'll still win, but not by a landslide.
Cisco Implements Direct-Purchase Plan
The new tax law pushed a number of companies to implement dividends for the first time in 2003. Several of these companies were in the technology field, a sector not noted for dividend-paying stocks. I think you will see that trend continue in 2004. One technology stock that certainly has the cash to begin paying a dividend is Cisco Systems (Nasdaq CSCO $24). If Cisco does institute a dividend in 2004, don't be surprised if the company implements a direct-purchase plan as well.
Dow Pushes to All-time High,
But Settles for Single-Digit Gain for the Year
It is tough to see the current momentum in the market being choked off in the first half of 2004. The three engines that drive stock prices - corporate profits, interest rates, and inflation - are all in the bullish camp. I would not be surprised to see the current momentum carry the Dow Industrials to new all-time highs above 11,722.98 and even above the 12,000 level. However, I wouldn't be surprised to see some fraying of the bullish story in the second half of the year. Interest rates, fueled by a stronger economy and greater demand for money, will have moved higher by that time. Quarterly profit comparisons for corporations will become more difficult as we head into the second half of the year. And inflation, which up to this point has been a non-event, may actually become more of a threat, especially if commodity prices remain high, the dollar remains weak, and the pent-up demand that businesses have for raising prices starts to be realized. Now I don't mean to paint a disaster scenario for the stock market. However, I believe market gains will be tougher to come by in the second half of the year. For that reason, I believe the Dow will finish 2004 in the vicinity of 10,700 to 10,900, or roughly 5% to 7% gain for the year."
John Dessauer's INVESTOR'S WORLD
7811 Montrose Rd., Potomac, MD 20854.
Monthly, 1 year, $249.
Health care stocks will catch up
John Dessauer: "Entertainment, housing and health care stocks are your best three sectors to accumulate in 2004. We have several stocks in the health care sector:
Aetna (NYSE AET $65.76) is a turnaround that has already turned around, financially. From a loss of $1.86 per share in 2001, Aetna earned more than $5.00 a share in 2003. In fact, Standard & Poor's 2003 estimate is $5.20 from operations. This year, earnings are estimated at $6.10. Aetna is a value stock with excellent potential. Aetna's challenge now is to generate profitable new business.
Aetna Management, under CEO Jack Rowe, M.D., has taken bold steps in packaging and handling managed care and medical insurance. In awarding its business to Aetna, GE's director of global health, Robert Galvin, said, "Instead of hunkering down, they're boldly creating a vision." Aetna is a Buy. My 2004 price target is $80.
Cardinal Health (NYSE CAH $62.45) says earnings this fiscal year will grow between 14% and 17%, with faster growth in the second half. The tough comparison is in the quarter just ended. Starting this quarter, earnings comparisons to 2003 will get better. Wall Street is uncertain about the quarter just past. This won't last long. Once that quarter is reported, analysts will crunch numbers for the full year. That is what counts. Cardinal has confirmed full-year guidance of $3.62 to $3.70 this fiscal year (ending June 30). For the new fiscal year that begins July 1, estimates are for $4.25. Cardinal is a Buy. My 2004 target is $85.
Novartis (NYSE NVS $44.36) is a no-worry pharmaceutical powerhouse. I say "no worries" because the balance sheet is loaded with cash, management is as good as they come, a new research facility is under construction in the U.S., earnings are rising and Wall Street has not yet caught on to the stock. Earnings for 2003 should be $1.00 and 2004 estimates are $2.05 to $2.24.
Aventis (NYSE AVE $64.14) came to life late last year, as the stock moved nicely from the low $50s to $64. Aventis is doing much better with Allegra than Wall Street expected. Sales have held up better than predicted. Earning for 2003 are expected to be $3.45, rising to $3.65 to $3.95 this year. Even though up nicely, Aventis is undervalued and is a Buy. My 2004 target is $80.
GlaxoSmithKline (NYSE GSK $45.45) is navigating the loss of patent protection on Paxil and still generating enormous amounts of cash. Glaxo continues to buy back millions of shares. Wall Street is raising its estimates to $2.75, up from an earlier $2.60. For this year, the estimate is $2.90, up from $2.75. Rising expectations are always positive. Glaxo pays a generous dividend and trades at a low 15.7 times this year's estimate. Glaxo is a Buy. My 2004 target is $55.
Valeant (formerly ICN) Pharmaceuticals (NYSE VRX $25.21) is working toward approval of a new oral Hepatitis C medication. This validates the buyback of the Ribapharm shares and puts the company in a much better earnings position. Estimates of 2003 are $0.81 per share, rising to $0.90 a share within five years. The new Hepatitis medication, a solid business plan for specialty pharmaceuticals and strong cash flows make Valeant attractive for the long run. My 2004 target is $29, so VRX would be a Buy below $25.
Rite Aid (NYSE RAD $6.07) earned a profit in its third fiscal quarter, ending in late November. Earnings were $0.03 per share, a penny better than expected. Rite Aid continues to execute its plan to raise sales per store. Front-end results now rival #1 Walgreen. Pharmacy sales are rising and likely to improve faster in 2004. Buying prescription (or scrip) files is a key to growing pharmacy sales, but that requires cash. Until recently Rite Aid has not had enough cash to aggressively buy scrip files. In the current fiscal year, Rite Aid targeted $20 million for scrip files. In the new fiscal year, beginning March, that will double to $40 million. This will lead to significant improvement in sales.
There is a wild card with Rite Aid. J.C. Penney put Eckerd Drugs up for sale last October. Several financing groups are lining up to bid. One group includes Leonard Green Partners, the firm that saved Rite Aid in 1999 and still owns a big block of shares. If the Green group wins, they could combine Eckerd with Rite Aid, so the Sammons & Miller team could work their magic and turn Eckerd around. If that happens, it will add to our potential gain in Rite Aid. I'll keep both eyes on the Eckerd story. Meanwhile, Rite Aid is a Buy."
LOOKING FORWARD
published by Friess Associates for clients and Brandywine Funds shareholders.
Allstate looking to ensure
sustainable and profitable growth
The late 1990s were heady days for some insurers as big gains in their investment portfolios enabled them to win customers with rock-bottom rates. But booming investments also masked a large pool of unprofitable relationships in their customer ranks, resulting in a prolonged period of reckoning following a downturn in those investments. With an eye toward risk control, Allstate (NYSE ALL) is seizing this opportunity to profit.
Allstate primarily provides auto and homeowners insurance. Until recently, these were relatively staid businesses in which mutually owned insurers, most notably industry leader State Farm, dictated pricing via their financial heft. The investment-driven change of fortunes, however, released that grip on pricing and put many customers up for grabs. Instead of trying to snap up every potential customer, Allstate employs sharp underwriting to price risk accurately and fuel profits.
Allstate's earnings excluding investment gains rose 25 percent in the September quarter, exceeding estimates for the third straight time in 2003. September-quarter revenues climbed 12 percent to $8.1 billion.
Profit margins expanded thanks to sequential growth in core standard auto and homeowners insurance lines, higher premiums and better-than-expected auto and homeowners loss frequency and severity. Allstate also publicly raised its 2003 earnings guidance from a range of $3.50 to $3.65 a share to between $3.65 and $3.80.
Friess analysts spoke with Chairman and Chief Executive Edward Liddy about different ways Allstate is looking to ensure sustainable and profitable growth. The company's "Strategic Risk Management" program helps the company target lifelong customers who are generally stable, profitable and buyers of more than one product.
Friess Assoc. bought Allstate at just 10 times 2004 earnings estimates. Wall Street predicts Allstate will grow earnings 20 percent in the December quarter, which would bring 2003 earnings growth to 27 percent.
S.A. ADVISORY
2274 Arbor Ln., #3, Salt Lake City, UT 84117.
www.saadvisory.com.
We Remain Very Bullish Towards 2004
Bill Velmer: "We believe that 04 will not be as easy as 03. In our opinion it will be a stock pickers market. We like the power generation group (CPN, DYN, AES), we like Big Pharma (SGP, MRK, PFE), we like and will continue to search out cheap and undervalued "penny stocks". We are very Bullish on the EMS industrial segment (FLEX, SANM, SLR, VSH). We like one Russian Oil Giant, namely, SIBNEFT (SBKYY $26.50) - recently broke off merger with Yukos.
We are negative on the Gold Stocks. We think that "tech" is expensive, but will continue to move higher. If we reach 2550 on the Nasdaq we would be extremely happy. We see little chance of an interest rate hike during the next 6 months. One unknown negative for the market is if another 9-11 happened within our boundaries.
Finally, we are very Bullish on Oil & Gas drilling programs that we continue to participate in.
Our favorite large cap investment opportunity for 2004 is Pfizer (PFE $35.60).
Drug stocks have been beaten down for much of the last 2 years (SGP, MRK, PFE) PFE is totally out-of-favor with the overly medicated herd! The company has a host of new drugs in development. The pipeline of new drugs fight conditions such as epilepsy, high blood pressure and arthritis. At $35.60 PFE trades @ 17X for the next 4 quarters, well below its 5-year median of 26.5X. While we wait investors receive a modest yield of 1.9%. We see very little downside risk @ current levels. By the time the herd gets wind of this juicy prize that prescribe a level of patients - PFE will most likely be trading @ $50.00. All the news is already baked into this stock and if results are only slightly more rosy-this stock will zoom. One of PFE's prize drugs, namely, Lipitor has over 50% of the cholesterol lowering medications market. This stock is high priced and it eats up a sizable amount of working capital, but is worth it. It is also a great defensive stock - offers great diversification within a basket of diverse investment opportunities. Another pill-to-pop is the stated Enterprise Value which equals $268.75- a far cry from the stated share value of $35.60. We also like SGP @ lower levels, but has more problems to contend with than PFE."
Editor's Note: Visit www.saadvisory.com or www.nasdaqstocksrus.com and leave your email address on site for free stock recommendations and updates. For personal conversation and recommendations with editor for 1 Year $650.
WATER INVESTMENT NEWSLETTER
230 Main St., Halstead, KS 67056. Monthly,
1 year, $140.
Economy signals it's a 'stock pickers'
market for investing in water this year
Stephen Hoffmann: "For the year, the Dow gained 25.3%, the S&P advanced 26.4% and the Nasdaq rallied over 50%. Water stocks were no exception, having benefited from the rising tide lifting equities. And while many Wall Streeters expect more gains in 2004, some caution that 2004 isn't likely to be as strong as 2003. With that backdrop it's a good time to reflect on the outlook for water stocks in the year ahead.
The outlook for equities in general depends greatly on the Fed. Even as the Fed has signaled a continued willingness to keep rates low for a 'long time,' they face the challenge of how they will avoid the mistake of unleashing inflation once again. The consensus looks to the Fed to begin raising rates in mid-2004 through a deliberate and reasoned strategy of slowly braking a growing economy.
There is no question that the economy is rebounding, but concerns over widespread optimism, the dollar's continuing slide, consumer spending, jobs growth, and terrorism point to potential meltdowns. So what do prognosticators say when they have no clue what the short term direction of the stock market will be - it's going to be a stock pickers market.
For investors in water, however, that's about as good advice as any. While it is increasingly difficult to identify pure plays in water, there are opportunities with companies that have a diverse customer base spanning multiple industries. Companies that serve the 'water business' are slowly being absorbed by basic materials companies and industrial conglomerates. Given that trend, virtually any 'pure' water company is a potential takeover candidate.
Stocks like Ionics (NYSE: ION), Trojan Technologies (Toronto TUV.TO), Zenon (Toronto ZEN.TO), Badger (NYSE: BMI), Calgon Carbon (NYSE: CCC), Franklin Electric (Nasdaq NM: FELE), Met-Pro (NYSE: MPR) and Watts Water Technologies (NYSE: WTS) all represent potential targets for strategic acquisition. It is not prudent, however, to invest in a company based solely on the takeover potential.
It is also not the time to be a water-investing purist. It is firmly believed that some of the greatest gains for investors in the water theme will be through industrial companies with emerging water platforms. These include many of the would-be strategic acquirers of water-related businesses; the likes of ITT (NYSE: ITT), General Electric (NYSE: GE), Danaher (NYSE: DHR), Pall Corp (NYSE: PLL), SPX (NYSE: SPW), Flowserve (NYSE: FLS), Crane (NYSE: CR), Pentair (NYSE: PNR), and IEX (NYSE: IEX) to name a few public companies.
Other opportunities in 2004 will arise from solutions to water issues that require interdisciplinary approaches; i.e., a convergence of disciplines. Examples include the use of new materials in water purification (e.g., Pall Corp; NYSE: PLL), biotechnologies in remediation (e.g., IDXX Laboratories; NYSE: IDXX), treatment breakthroughs from basic research in chemistry (e.g., Engelhard; NYSE: EC), advances in analytics (e.g., Emerson; NYSE: EMR) and advanced information technologies applied to operations.
However, a significant challenge in investing in water is the lack of regulatory pressure in adhering to implementation timeframes and enforcing compliance. This is a challenge only made worse by tight municipal budgets.
Stock pickers can also focus on attractive water themes such as infrastructure, wastewater treatment technologies, biosolids, stormwater, analytical instrumentation, disinfection alternatives, residential (decentralized) treatment and contaminant removal/remediation.
The infrastructure theme remains long on promise and short on delivery. Patience will be a key aspect of investing in companies that serve the water infrastructure. Despite the overwhelming consensus that the aging U.S. water delivery system is in critical need of update and repair, municipal budgets simply do not allow the prioritization of upgrades over issues such as security and regulatory compliance. That said, stricter water and wastewater management and stormwater regulations will gradually force municipalities to address system obsolescence and drainage issues.
Within this segment are in-situ rehabilitation technologies, leak detection and distribution system retrofits and upgrades. It is as much a materials issue as it is an outsourcing theme but there are a number of ways to view the segment. Astec Industries (Nasdaq NM: ASTE) is engaged in machinery for the underground construction market, Roto-Rooter (NYSE: RRR) and Stewart & Stevenson (NYSE: SVC) are more diversified plays, Northwest Pipe (Nasdaq NM: NWPX), Ameron International (NYSE: AMN), Insituform (Nasdaq NM: INSU) and Underground Solutions (Other OTC: UGSI.PK) are engaged in pipeline renewal technologies and materials.
One of the most attractive areas, yet arguably one of the most difficult to invest in, is the treatment market. This is because of the broad array of diversified public equipment manufacturers and the enormously fragmented market composed of private companies. Nonetheless, given the fundamentals there are several approaches that can be taken.
One is to look at companies like ITT that, with the acquisition of WEDECO, is now engaged in both ozone and UV disinfection. GE, while subject to many other market influences, has a growing presence in water through its GE Water Technologies group. Then there are specialty companies such as Trojan in UV, Calgon Carbon in perchlorate removal, Ionics in desalination and Engelhard in arsenic. As 2004 progresses, WIN will identify the companies with the relative advantage within their markets.
The emergence of new products for the consumer market is also an area with above-average growth prospects. This is a market that is easier to define for electronic gadgets than for water products, but the trend to decentralized treatment in the home continues. While the business model that attempts to crack the retail market for water treatment products is compelling, no one has succeeded on a large-scale.
Despite the lack of success, the consumer market for water treatment products remains one to watch. Some potential names that are more direct investment plays in this arena include Watts Water Technologies (NYSE: WTS), Pentair (NYSE: PNR) and CUNO (Nasdaq NM: CUNO). Even these companies, with direct strategic exposure to the residential consumer markets, see the light commercial and industrial markets as important to their mix.
After last year's broad advance, 2004 is likely to be much more selective. In addition to changing market leadership, investors will be looking for companies that will benefit from the phases of an expanding global recovery, whether in commodities, basic materials or consumer staples. There will be many segments that will experience increasing demand and water should be one of them.
But the advances will not be even. There are plenty of examples; municipal budget constraints lead to spending prioritization, regulatory mandates favor best available technologies, the need for operational efficiencies benefit service providers and compliance requires analytical methods. The WIN Model Water Stock Portfolio will highlight those selections that are believed to offer attractive fundamentals in the upcoming year."
THE KONLIN LETTER
5 Water Rd., Rocky Point, NY 11778.
Monthly, 1 year, $95.
Universal Express, Inc. continues
very aggressive acquisition program
Konrad Kuhn: "Recommended in July and once again as the SOM in November, Universal Express, Inc. (OTC BB: USXP, $0.65) owns and operates several subsidiaries, including Universal Express Capital, Universal Express Logistics (including Virtual BellHop, WorldPost, and Luggage Express) and the Private Postal Network. These subsidiaries provide the private postal industry and consumers with value-added services and products, logistical services, equipment leasing and cost-effective delivery of goods worldwide. USXP recently acquired a portfolio of seasoned and performing commercial lease receivables valued in excess of $3 million gross with servicing provided by one of the top 50 banks in the U.S. USXP now has in place a foundation for booking transactions with leading national banks. The company will be able to book these transactions in the future as an asset, which will strengthen the balance sheet and improve operating cash flow, giving them access to potential customers for future lease/financing volume.
USXP also announced that its subsidiary, The Virtual Bellhop, a pioneer in baggage-free travel through sophisticated baggage movement systems and software that arranges to pick-up luggage and any bags that can be checked onto a flight and delivered to its end destination or port, expanded its luggage free travel services to the cruise industry. Crystal Cruises (parent company NYK of Japan - the largest shipping company in the world), a multiple award winner for the "World's Best Large Ship Cruise Line," includes the only Caesars Palace at Sea casino afloat and the popular Computer University@Sea, offering 24-hour Internet access. No matter where in the world the cruise begins, the Virtual Bellhop service will pick up luggage for those leaving on cruises and deliver it directly to the ship. In addition, USXP acquired the successful and profitable BagsToGo, Inc. (anticipates $4 million in annual revenues), a diversified logistics provider in South Florida that also provides lost luggage delivery services for major airlines and has experience dealing with the intricacies of security concerns by the Transportation Security Administration and the logistical concerns of airport operations, which strengthens and greatly complements USXP's (Luggage Express - after a decade of experience they have not lost any baggage, not a single bag!) luggage delivery business that advocates going to the airport carrying nothing.
"Isn't there a better way?" As Congressman John Mica (R-FL) Chmn. Of the House Subcommittee on Aviation muses does "TSA" (Transportation Security Agency) really stand for "thousands standing around?" Chmn/CEO Richard Altomare shows true entrepreneurialship when he proposes revolutionizing how airline baggage is handled and shipped. He is lobbying congressmen to make the change by separating airline passengers and their luggage, enabling passengers to affordably ship their luggage and bags ahead of time to their final destination, as one way to cut down on the threat of terror in the skies. "Try this as a pilot program in a few airports in the country. Then I think you'd find many saying, 'OK, I'll ship it ahead.' Actually, it's good for a lot of jobs through the Postal Service, FedEx or UPS or others. And when one looks at the amount of money, and the time and cost of checking luggage, that's a big cost in your airline flight and obviously a lot of security at the airport," stated Virginia Senator George Allen. The plan could save the government $1.4 billion in baggage screening costs and up to $6 billion in labor costs, while generating billions of dollars in new revenue for the freight industry overall and potentially a few hundred thousand new jobs.
Recently, subsidiary Universal Cash Express entered into a strategic partnership agreement with Blackstone, a pioneer and leading provider of electronic prepaid products and services. Universal Cash Express products have an excellent reputation in the marketplace and will be offered through thousands of points of presence that Blackstone has in place with retail merchants worldwide. Additionally, USXP will introduce co-branded Blackstone terminals to thousands of private postal stores within the Universal Express WorldPost network of merchants, with products offered from the terminals, which will include a floral gift card from a major floral association and the Universal Express Platinum Prepaid MasterCard/Debit Card program.
USXP continues its very aggressive acquisition program (one agreement could increase '04 revenues to approx. $200 million) and is in ongoing negotiations with two air courier services and also a strategic acquisition that could double the size of newly acquired SCI (anticipates $160 million in revenue). USXP is making headway in tracing of funds with regard to the $500+ million judgment and other assets. Meanwhile, the stock after hitting .13 for 300%+ gains has since pulled back into strong support in the .065 area where it is establishing a new base to launch its next up-leg from. Our targets remain the same and once the stock closes above .13 and starts to chew up resistance at the .16 level we can expect a run to the .27 area. From there we could see an explosive upsurge to .65 or better.
Since the stock had an explosive upsurge through its five-year downtrend line last year, the shorts were screaming that it was just a short-term aberration. With strong entrepreneurial leadership and an aggressive strategic acquisition program, you can understand the comment we made in our last report that instead of betting on the horse at the racetrack we will bet on the jockey. The shorts are having a rough time, and if we are correct, they will be totally defeated."
INVESTOR'S VALUE VIEW
2240 Winter Woods Blvd., Ste. 1010, Orlando, FL 32792.
Monthly, 1 year, $95.
Bio-Rad world's leading producer
of tests for mad cow disease
R. Scott Pearson: "Bio-Rad Labs (BIO) is the world's leading producer of tests for mad-cow disease. It also makes other diagnostic tests and chemical separation and analysis tools. More than half of the company's business has been international, but we believe the recent mad-cow scare in the Northwest may boost domestic sales somewhat. It remains uncertain whether the government will choose to require the Bio-Rad test or those of another supplier, but the Agriculture Department has publicly committed to using the rapid tests; only Bio-Rad and Abbott Labs provide those. It is likely that the contract will go to one of those companies because of the current administration's unspoken policy of steering business toward American manufacturers where possible. We believe there is a 50% chance that Bio-Rad will get a sizeable new contract. The company may be mulling acquisitions to broaden its line. But detection Mad-Cow disease is just one of many of Bio-Rad's wide-ranging services. The company is a world leader in a broad range of tools and services to the clinical diagnostics and life research markets, including diabetes research. Serving over 70,000 research and industry customers worldwide, BIO employs over 4,500 people.
Currently, Bio-Rad is waiting to see what the USDA will do about using the Bio-Rad test in US markets. However, the company is in excellent shape, and even without any anticipated boost. Bio-Rad shares are attractive, with a favorable growth rate, a promising industry, and an affordable share price. Either way, we see BIO as a buy."
BOTTOM LINE PERSONAL
281, Tresser Blvd., Stamford, CT 06901.
1 year, 24 issues, $59.90.
Will Muggia: "Elan Corporation plc (NYSE ELN; ADSs - American Depositary Shares) develops medicines for central nervous system diseases. It was investigated for accounting irregularities, but an SEC settlement is in the works. New management sold some assets. Elan now has $1.3 billion in cash and $700 million in annual sales. In a venture with Biogen, it is developing Antegren for multiple sclerosis. Elan also is developing Prialt for chronic pain.
Fiscal year: December. Earnings per ADS: 2004 estimate/($0.60)...2003 estimate/($0.90)...2002/($0.42)."
Editor's Note: Will Muggia is portfolio manager of the $440 million Touchstone Emerging Growth Fund, Cincinnati. For the five years through December 31, 2003, the fund's annualized rate of return (APR) was 16%, vs. 7.13% for the Russell 2000 Index.
COMMON CENTS
P.O. Box 126354, Benbrook, TX 76126.
1 year, 6 issues, $48.
Lowe's: Still big growth to be had
Roland Carter's recent Buy recommendations include: Bemis Company (BMS), Gannett (GCI), Lowe's (LOW), Pepsico (PEP), and Office Depot (ODP).
Lowe's operates building materials and home improvement superstores in 44 states. With $31 billion in 2003 revenues, they're about half the size of Home Depot (which we also like and own), but growing faster. 10-year EPS growth of 28% may slow to around 20% over the next five years, but both HD and LOW are putting most competitors out of business and adding to their retail offerings (washers/dryers, refrigerators, etc.) LOW shares rose from 1+ to 60+, 1990 to 2003. They're still a buy, and a good value @ 20x 2004's EPS estimate of $2.70/share. There is still big growth to be had here."
THE TURNAROUND LETTER
Suite 801, 225 Friend St., Boston, MA 02114.
Monthly, 1 year, $195.
Grocery store stocks:
In the bargain aisle?
George Putnam III: "The historical stability and low business-risk profile of the grocery-store industry - we must eat after all - has made the group popular with conservative investors in the past. But alas, even this most prosaic industry now faces a host of threats: market saturation, consumer's desire to eatout, pricing pressures from mega-stores like Wal-Mart and cost pressures from labor unions seeking higher wages and benefits. Moreover, several grocery chains used their conservative image to raise debt at inopportune times.
There have been many recent examples of the troubles facing the industry. The Great Atlantic & Pacific Tea Company's very viability is being openly debated, and Safeway, unable to find a buyer for its Dominick's chain, has simply decided to close down many of those stores. And labor unions recently stepped up their efforts by calling for a nationwide boycott of Safeway.
These problems are real, but they are well known and are likely already reflected in the stock prices. Moreover, many of the chains are addressing their problems. For example, they are selling assets to improve their balance sheets and are actively developing new strategies to combat Wal-Mart. And if the stock market weakens again, investors may flock back into this group that is still perceived as defensive.
Therefore, we believe that the grocery stocks may be poised for a rebound. The table on the next page lists ten stocks of varying market capitalizations and risk profiles that could benefit if the group does come back into favor. Out thoughts on the stocks follow.
Ahold (AHO $8.62) is a Netherlands-based company with operations in the U.S. (Stop & Shop in the Boston, MA area and Giant Food in Landover, MD), Europe, Latin America and Asia. The stock, though sliding throughout much of 2002, really took a hit in early 2003 when the company announced that earnings would need to be restated and the CEO and CFO resigned. Since then the company has been selling assets and restructuring. The accounting issues seem to be behind them now, and the stock, while still risky, has good return potential.
Albertson's (ABS $23.51) operates 2,287 food and drug stores throughout the U.S. Costs from a 1999 acquisition, rising competition and the failing economy led to management changes in 2001. Asset sales, store closings and job cuts ensued, but the recovery has taken longer than expected. However, Albertson's remains profitable, is gaining market share, has manageable debt and is able to invest in growth initiatives like Internet shopping and store upgrades. While the near-term is still uncertain, Albertson's appears well poised for long-term gains. It also pays a generous dividend of 3.2%.
The Great Atlantic & Pacific Tea Company (GAP $8.87) recently announced better-than-expected results for its third quarter, but there remains active debate as to the company's viability as a going concern. The company is still unprofitable and is burdened by a heavy debt load. While we feel, generally, that investors have discounted the industry's worst problems, we consider A&P to be one of the weakest players in the group.
Ingles Markets (IMKTA $11.67) operates a chain of 198 supermarkets in Georgia, North Carolina, South Carolina, Tennessee, Virginia, and Alabama. The company has kept its revenue growth momentum via promotions, but that has hurt margins. Long-term debt is an issue, but positive working capital and a good level of saleable assets reduce overall company risk. Ingles could be a good speculation.
The Kroger Company (KR $18.66), owner and operator of about 2,500 supermarkets, has steered its industry's turmoil with a reasonably steady hand. Revenues have consistently grown, albeit at a slower pace than in past years, and the company has remained profitable. Cash flow has been decent, and the company has been reducing debt and repurchasing stock. The stock has held up better than others we review here, but it is well off its early 1999 high near $35.
Pathmark Stores (PTMK $7.70) operates its 144 supermarkets in the New York, New Jersey and Philadelphia metropolitan areas. A heavy debt load forced the company into bankruptcy in 2000. It emerged from chapter 11 later that year with reduced leverage. Results have been spotty and there is still a fair amount of debt, but we think Pathmark is a reasonable speculation.
Safeway's (SWY $22.87) roughly 1,700 stores are spread across the U.S. and Canada. While labor problems muddy the near-term picture, we're rather upbeat about the company's long-term outlook. Debt is manageable and being paid down; operating cash flows are amply covering capital expenditures. The stock is off its early 2003 lows, but has plenty of room for further appreciation.
Weis Markets (WMK $35.55) owns about 160 retail food stores and 33 pet supply stores in Pennsylvania and surrounding states. The company stands out among the group as the only one to be debt free. Unencumbered by interest expense, most of the company's operating profits are falling to the bottom line. At current prices, the dividend yield is just over 3%. Weis is likely the most conservative way to play a rebound in the grocery-store sector.
Wild Oats Market (OATS $13.12) is the only specialty food retailer on our list. The company's 102 U.S. and 25 Canadian-based stores concentrate on natural and alternative foods. Sales have been steadily rising, and the company has been generally profitable. The financials are good, with minimal long-term debt and solid operating cash flow. The stock rebounded off its 2000 lows, but has since been struck in a range between about 7 and 15 for two and a half years. It has been reported that Kroger might have an interest in acquiring Wild Oats.
Winn-Dixie Stores' (WIN $9.30) stock has been in a fairly steady decline for roughly six years. While sales from the company's nearly 1,100 supermarkets in the southeast and Bahamas have been declining for several years. The company has been able to hold onto profitability. Debt is relatively low. The stock market looks attractively priced for aggressive investors."
THE CONTRARY INVESTOR
309 South Willard St., Burlington, VT 05401.
Monthly, 1 year, $125.
The valuation for Steris is appealing
Tiffany Lawrence: "Steris Corporation (NYSE STE $23.55, www.steris.com) offers a broad array of infection prevention and decontamination products, technology and services. Sterile processing systems range from proprietary chemical and steam washers and disinfectors to sterile process validation systems. Recurring revenues are generated by consumables such as body washes, shampoos and aerosol disinfectants. Steris also specializes in surgical and critical support equipment including surgical lighting systems, stretchers, operating tables and equipment management system. The company's Isomedix division maintains sixteen facilities in North America and provides for the contract sterilization of medical and pharmaceutical products as well as cosmetics and food packaging. Steris' Strategic Technology Enterprises is a recently formed subsidiary to provide contingency planning and support against biological and chemical warfare contamination. The company's anthrax decontamination services were commissioned by the Department of State for a mailroom cleanup in December '03.
In the late 80's, Steris introduced the revolutionary Steris System 1(r). The system provided the surgeon with tabletop access to a sterilization system with proprietary chemistry to decontaminate delicate heat-sensitive surgical instruments in a thirty-minute timeframe. In the throes of success, the company went on an acquisition binge. There was a bout of indigestion as the acquired businesses were not adequately integrated and the company failed to produce anticipated earnings. The stock suffered as a result.
Les Vinney, the current CEO, was brought on board in 1999 and set out to consolidate facilities, control costs, and organize a more aligned R&D team. Seventy-five percent of current management has been hired within the past three years. Management maintains a growth-through-expanded-distribution strategy. Focused acquisitions aim to access new distribution channels and sales strategies involve augmenting existing client relationships with additional Steris products and services.
The company's valuation is appealing. Earnings guidance for fiscal '05 (beginning April 1, 2004) is set at $1.50 per share and Steris currently trades at less than twelve times expected operating cash flow. Debt is low at 15% of capital. Free cash flows for the current fiscal year are targeted at $60 million. At this rate of free cash generation, Steris' total debt could be retired in less than two years - stock buybacks or payment of a dividend become all the more likely.
Over 70% of company revenues have historically been generated from hospitals. We expect demand in this market to remain firm in light of both an aging population and increases in hospital spending. Demand for infection control with new life-threatening pathogens, and increasingly stringent healthcare standards also serve to favor Steris' fundamental business. Target: $30 in 12 months. Catalysts: Evidence of succuss in leveraging product lines in new markets, new product introduction and/or initiating payment of a dividend."
THE PRIMARY TREND
700 North Water St., Milwaukee, WI 53202.
Monthly, 1 year, $80.
Merck one of the cheapest stocks in its group
Barry Arnold is increasing his exposure to the healthcare sector by adding Merck & Co. (NYSE MRK $47.60) to the portfolios.
"Merck has a market capitalization of $110 billion and 2003 revenues of $23 billion. Some of MRK's core drugs include Zocor (cholesterol lowering), Fosamax (osteoporosis), Vioxx (anti-arthritic), Singulair (asthma) and Prilosec (gastro-intestinal).
MRK has declined nearly 60% from its all-time high of 96 reached in late 2000 to its recent low of 40. The stock's collapse is quite interesting in light of the fact that it is not a tech stock but a once-Wall Street darling and component of the Dow 30 Industrials. MRK's lackluster earnings performance in 2003 and cloudy pipeline prospects have also weighed heavily on the stock.
We feel the bad news is out on the table and have purchased Merck & Co. common shares in client portfolios, as well as the Primary Trend fund and The Primary Income Fund, for the following reasons:
1. Zocor, a drug that contributed $5.6 billion in revenues in 2002 goes off patent in 2006. Wall Street is overly focused on this event and has penalized the stock already. However, MRK's Zocor/Zetia phase III joint development with Schering-Plough should hit the market by August of this year. This is a low-risk trial with huge revenue potential ($2 billion in the first year).
2. Despite MRK's two recent phase III failures in 2003, it still has huge upside potential with its cervical cancer vaccine (HPV). This could be submitted to the FDA in 2005 - well ahead of its expected 2007 window.
3. MRK common is one of the cheapest stocks in its group and pays one of the heftiest dividends. At $1.48 annual dividend, the stock pays an above-average yield of 3.1%.
4. Based on current earnings estimates of $3.13 per share for 2004, MRK is trading at a historically low P/E of 15.3x. MRK has only been this cheap twice before - and both times the stock rallied smartly.
MRK still has an uphill battle trying to reassure investors that its healthy pipeline of new drugs will counter is upcoming Zocor patent expiration. And it also shares some problems common with the pharmaceutical industry in general; but at current prices, these problems are well advertised and already reflected. Long-term income-oriented investors should buy MRK common up to 50."
UPSIDE
7412 Calumet Ave., Hammond, IN 46324.
Monthly supplement to Dow Theory Forecasts.
www.upsidestocks.com
Axcan thrives in digestive tract
Richard Moroney: "Axcan Pharma (Nasdaq AXCA $18), a fast-growing maker of specialty drugs, is on a roll. The company has posted seven straight quarters of at least 20% sales growth, including a 27% gain in the September quarter. With healthy sales and earnings growth likely in the near term - and the company making good progress in efforts to expand its product line - the stock seems undervalued at 20 times the $0.89 in per-share earnings expected for fiscal 2004 ending September. Axcan, upgraded to Best Buy on the Jan. 6 hotline, has superior 12-month potential.
Based in Canada, Axcan specializes in treatments for diseases of the digestive system selling more than 40 products and dosage strengths.
Axcan's stable of drugs should benefit from sizable outlays on research and development. In fiscal 2003, the company invested $11.6 million in R&D, or about 7% of total revenue. More than one-half of annual sales come from internally developed products. Axcan expects to launch nine products before the end of 2005. In January, the company filed a new application with the FDA of a treatment for inflammatory bowel disease.
Long-term sales could benefit from ITAX, which is set to enter phase III clinical trials. A potential blockbuster, ITAX is a treatment for functional dyspepsia, a disorder of the upper gastrointestinal system that each year affects roughly one in four Americans. The drug, which could launch as early as 2006, is expected to boost annual revenue by $200 to $300 million.
Axcan also uses acquisitions to boost sales and expand its footprint. In November, the company acquired the rights to three drugs from Aventis S.A. that together generate around $40 million in annual sales.
Axcan scores an impressive 92 for Overall Quadrix, keyed by high scores for Quality (81) and Earnings Estimates (85). Despite adding debt to fund acquisitions, the company's balance sheet remains strong. At the end of September, long-term debt was a modest 23% of total capital. The company has $3.75 per share in cash.
Axcan offers an impressive growth story at a reasonable price. For fiscal 2004 ending September, Wall Street expects per-share earnings to grow 22% to $0.89. For fiscal 2005, per-share profit estimates range from $0.97 to $1.13. the average estimate of $1.04 implies 17% growth. December-quarter results are due Feb. 5. Per-share earnings are expected to be up 36% to $0.19, fueled by a 26% sales increase.
Axcan trades at 19 times estimated year-ahead per-share earnings of $0.94 - a 28% discount to the average small-cap drug stock's P/E of 26. Applying a 26 multiple to Axcan's projected 12-month earnings implies a $24 stock price. Risks of owning Axcan include intense competition and uncertainty regarding new product launches. A delayed approval or rollout of ITAX could hurt the shares. Still, Axcan offers plenty of upside potential given its strong market niche, healthy balance sheet, and modest valuation. An annual report for Axcan Pharma Inc. is available at 597 Laurier Blvd., Mont Saint-Halaire, Quebec, Canada J3H 6C4; (450) 467-2600."
WALL STREET STOCK FORECASTER
250, Liston Rd., Ste. 700, Buffalo, NY 14223.
Monthly, 1 year, $99.
Encompasses monthly bulletin; weekly phone/email Hotline and monthly supplement, Portfolios.
Kinko's widens FedEx's scope for growth
Patrick McKeough: "FedEx Corp. (NYSE FDX $68, WSSF Rating: Average) provides overnight, door-to-door delivery of packages of documents in the United States and over 210 other countries. It owns a fleet of 643 aircraft, as well as over 70,000 ground vehicles. The company handles roughly 5.4 million shipments a day.
FedEx's revenues grew steadily, from $16.8 billion in 1999 (fiscal years end May 31) to $22.5 billion in 2003. Profits rose from $2.10 a share (total $631.3 million) in 1999 to $2.32 a share ($688.3 million) in 2000, but slipped to $2.26 a share ($663.0 million) in 2001 as the economy slowed. Profits climbed steadily to $2.74 a share ($830.0 million) in 2003.
Air operations restructured
Most of the company's recent profit growth has come from its ground operations, not its larger air delivery business which accounts for roughly 75% of its total revenues.
Consequently, FedEx decided to cut costs at the air division, mainly through early retirement packages. These moves will cost FedEx roughly $440 million, but should save it up to $145 million in the current fiscal year, and $240 million a year thereafter.
If you disregard these costs, FedEx earned $0.87 a share (total $266 million) in the second fiscal quarter ended November 30, 2003, up 7.4% from $0.81 a share ($245 million) a year earlier. Revenues rose to $5.9 billion from $5.7 billion.
Largest acquisition to date
In December 2003, the company agreed to buy the privately held Kinko's copying and printing chain for $2.2 billion in cash and the assumption of $200 million of Kinko's debt. The purchase should increase FedEx's annual revenues by $2 billion, and contribute to its profits starting in fiscal 2005.
The company already operates counters in 134 Kinko's outlets. It now plans to offer shipping services in all 1,200 Kinko's stores. This should make it easier for small and mid-sized businesses to ship packages, particularly overseas, since trained staff can help them with the necessary forms.
FedEx had just over $1.0 billion in cash at November 30, 2003, so it will have to finance the purchase with new debt. That will raise its long-term debt from 0.26 times equity to around 0.45 times. The company generated $953 million or $3.13 a share in cash flow in the first half of fiscal 2004, so it can easily absorb the extra debt.
Threat of price war increases risk
FedEx's main competitor, United Parcel Service (UPS), recently dropped its fuel surcharge on ground deliveries. It seems that UPS intends to protect its market share. FedEx does not plan to start a price war by cutting its own rates, but UPS's actions could spur other competitors to do so. That would hinder growth at FedEx's ground division.
The stock fell to 4$8 in February 2003, but climbed to a record $78 in November 2003. It now trades for 20.5 times the $3.31 a share it should earn in fiscal 2004 before restructuring costs. It also trades below its revenues of $77.02 a share. The $0.24 dividend yields 0.4%.
FedEx is a buy."
Dr. Mark Skousen's FORECASTS & STRATEGIES
One Massachusetts Ave. NW, Washington, D.C. 20001.
Monthly, 1 year, $199. www.MarkSkousen.com
Super performer Whole Foods Markets
has tripled in value since 2000
Mark Skousen's latest stock recommendation is Whole Foods Markets (WFMI $69.75), the fastest growing natural/organic grocery store in the nation. Founder and chief executive officer John Mackey is one of the most remarkable success stories in business these days. He just won the 2003 Entrepreneur of the Year Award from Ernst & Young. Mackey started Whole Foods in 1980 with one store and now has over 146 across the nation. Mackey's genius is that Whole Foods is not just a natural foods store, but he has mixed it with standard fare from regular grocery stores, letting customers choose what kind of food they want to buy. An exception: Whole Foods sells no cigarettes or tobacco products of any kind. They do sell a wide variety of fine wines and meats, even though Mackey is a strict vegetarian. I've talked to a large number of customers and employees (called "team players") at Whole Foods and have not heard a single complaint, other than perhaps the high prices. But you get what you pay for. Mackey's goal is not to appeal to the entire country of consumers, but only about 10% of he market share. But I noticed that the customers are of all ages, races, and income levels. Financially, Whole Foods is on a roll. Revenues and earnings have been moving up steadily, and Whole Foods is expected to earn $1.90 a share this year. Last year it paid its first dividend, albeit small, only 15 cents a share. The stock has been a super performer, tripling in value since 2000.
Action to take: Buy Whole Foods Market (WFMI) at under $70 a share. Our target is $100 a share by the end of 2004."
Editor's Note: CEO John Mackey will deliver the keynote address at FreedomFest, May 13-15, at Bally's/Paris Resort in Las Vegas. For more information on FreedomFest go to www.freedomfest.com
OTC INSIGHT
2121 N. California Blvd., Ste. 560, Walnut Creek, CA 94596.
Monthly, 1 year, $295.
Cal-Maine Foods: Exceptionally attractive
Cal-Maine Foods (CALM) is one of 12 Exceptionally Attractive Stocks on Jim Collin's Buy List.
"Cal-Maine Foods is primarily engaged in the production, cleaning, grading and packaging of fresh shell eggs for sale to shell egg retailers. The company had sales of approximately 571 million dozen shell eggs during the fiscal year ended May 31, 2003. Shell eggs are sold directly by the company primarily to national and regional supermarket chains. Cal-Maine also produces specialty eggs and operates a dairy facility. The company is located in Jackson, Mississippi and can be reached at 601-948-6813 or on the Internet at www.calmainefoods.com
Products/Services - Cal-Maine produces approximately 98% of their chicks in their own hatcheries and approximately 97% of the feed they use has been manufactured at their own feed mills. They use modern in-line facilities that mechanically gather, clean, grade and package the eggs. This has generated significant cost savings as well as producing a higher percentage of grade A eggs, which sell at higher prices.
Their specialty eggs include Eggoland's Best, which are patented eggs that are believed to cause no increase in serum cholesterol when eaten as part of a low-fat diet. The product is sold at prices that reflect a premium over ordinary shell eggs and accounted for approximately 6.1% of net sales in fiscal 2003. Their other specialty egg brand (Farmhouse) are produced by hens that are not caged and are provided with a diet of natural grains and drinking water that is free of hormones and other chemical additives. Farmhouse eggs accounted for 2.5% of net sales in fiscal 2003.
Financials - For the quarter ended November 30, 2003, Cal-Maine Foods reported earnings of $1.45 per share, $1.28 better than the $0.17 earned in the prior year. Revenues increased 58% to $150 million compared to $95 million reported last year. Results in the quarter benefited from increased demand for eggs in high-protein diets made popular by Atkins, and recent positive publicity about the health benefits of eggs.
Technical Comments - Cal-Maine Foods recently reached an all time high on December 29, 2003 and has pulled back in the past few days. Of the approximately 5.18 million shares in float, 401,900 trade daily. Banks and mutual funds own 73% and management owns another 51% of the shares outstanding. The company has a relative strength of 99 and receives an A+ for accumulation/distribution.
Caveats - Cal-Maine's operating income or loss is significantly affected by wholesale shell egg market prices, which can fluctuate widely with retail sales of eggs being greatest during the fall and winter months and lowest during the summer months. Additionally, the company's cost of production is materially affected by feed costs, which average about 55% of Cal-Maine's total farm egg production cost and are projected to increase in 2004.
THE BLUE CHIP INVESTOR
575 Anton Blvd. Ste. 570, Costa Mesa, CA 92626.
Monthly, 1 year, $249.
Becton Dickinson benefits
from aging of the U.S. population
Peter Hughes: Becton Dickinson (BDX $45) is a large producer of medical supplies. The company has diversified into the related fields of bio-scientific and laboratory supplies/systems. BDX dominates two markets - syringes and blood-collection devices. These are profitable niches and help the company achieve a 13% net profit margin. The firm uses cash produced from these items to develop new products, make acquisitions and repurchase stock. Because its products primarily serve the medical market, the company is not sensitive to the business cycle. BDX also benefits from the aging of the U.S. population.
In the late 1990s Becton Dickinson changed its focus, becoming increasingly interested in making acquisitions. Growth slowed and the stock price declined. The stock has now rebounded and is within 10% of is all-time high, but the decline does appear to have provided a good buying opportunity. Current management is doing a better job of deploying capital, signaled by its recent desire to repurchase its own stock. The company also has several new products entering the market. Becton Dickinson's products have strong positions in non-cyclical, recession-resistant markets. Buy Below: $38.
Editor's Note: Check Capital Management has started a new mutual fund, Blue Chip Investor Horizon Fund. The intention is that Horizon Fund be a bond alternative fund. Its goal is to deliver annual returns in the 6-to-8% range, with low volatility and a low chance of loss over any two-year period. For more information telephone (714) 641-3579 or visit the web site, www.checkcapital.com.
The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT
65 Lakefront Dr., Akron, OH 44319.
1 year, 24 issues, $389.
Alberto-Culver: A defensive position
in an uncertain market
George Dagnino: "Stocks are going to trade in a narrow range. The 1165-1170 range is a major resistance level - close to 1.5 billion daily shares - for several weeks is needed to overcome this important obstacle.
Because of the uncertain market conditions, we are recommending a stock in the cosmetics sector. These stocks have excellent defensive features in terms of price stability and steady earning growth.
Alberto-Culver Company (NYSE: ACV $61.65) develops, manufactures, distributes and markets branded consumer products to the United States, Canada and more than 120 other countries. These branded consumer products consist of beauty and healthcare products and food and household products.
The stock of this company has outperformed the market by a wide margin during the difficult 2001-2003 period. For this reason we believe it represents a valuable defensive position in the uncertain market we are facing."
TECH STOCK INSIGHTS
1200 Fifth Ave., Ste. 625, Seattle, WA 98101.
Monthly, 1 year, $275. Web: $225. www.techstockinsights.com.
Remains bullish on disk drive companies
Randy Williams-Gurian: "I remain bullish on the disk drive companies over the longer term, however, since the top remaining companies are well positioned to deliver earnings. Our favorites, as noted in the December issue, remain: Western Digital (WDC), Seagate (STX), and Maxtor (MXO). I am also impressed with Komag (KOMG), and Hutchinson Technology (HTCH).
We expect a meaningful recovery in the disk drive market in the second half of this year. KOMG issued a rosy fourth quarter outlook. The company said fourth quarter revenue would likely exceed $117 million, while earnings could top 60 cents a share, double the consensus profit goal of 30 cents as reported by a Thompson First Call survey."
THE MONEYPAPER
555 Theodore Fremd Ave., Ste. B-103, Rye, NY 10580.
Monthly, 1 year, $99.
Your kids can grow very rich
very easily (time is on their sides)
Vita Nelson: "A child who invests $50 a month from age eight to age 13 ($3,600 over six years) will end up with more at age 65 ($1,302,154) than someone who starts investing at age 26 and invests $2,000 every year until he or she retires 39 years later, with $1,291,654.
In this illustration, we assumed an 11% return on investments. While 11% in the current environment may seem unattainable, that is the stock market's historical return since 1926 and that is the average performance attained by our model DRIP portfolios in Direct Investing (over a seven-year period in a bad market). As the time span for an investment expands, the risk of poor results diminishes.
We believe the following six-company DRIP portfolios will produce the results cited above-or even improve on them.
The cost of the qualifying share of the six companies and establishing the DRIP accounts will be less than $500. After that, each year you might invest $50 a month on a rotating basis, for a total annual investment of $100 in each DRIP. After six years, you'd have invested $3,600 - $600 in each company (plus the initial investment). Then let the dividends compound to provide wealth for your child's retirement. But don't expect to see substantial growth until far into the future. When we say time is the greatest factor, we mean it! You won't see the benefit of this compounding wealth until the end of the investment period.
The "Make Your Child a Millionaire" Portfolio
3M Company (MMM) sells more than 50,000 products in more than 200 countries. As testimony to its innovative culture, products introduced in the past three years account for one-third of its annual revenues. The dividend is now $1.32 per share.
Anheuser-Busch (BUD) is a diversified beverage and entertainment company with projected sales in excess of $14 billion. Its dividend is 88 cents per share.
Bank of America (BAC) has 4,200 branches in 21 states, plus offices in 37 countries, all providing a full range of financial services. The dividend is $3.20 per share.
Coca-Cola (KO) is the world's largest beverage company, with numerous internationally famous brands. The dividend is 88 cents per share.
Johnson Controls (JCI) manufactures auto components, climate controls, Fire-protection devices and lighting security systems. The dividend is 90 cents per share.
Pfizer (PFE) has increased its earnings every year, with one exception, since 1982. Its dividend is 68 cents per share."
Editor's Note: Subscribers to The Moneypaper can become enrolled in any of the 1,000 DRIPs at a discounted service fee. For complete details of the direct investment plans of every company that offers a DRIP plan, send for a copy of the Guide to Direct Investment Plans ($15 for Moneypaper subscribers of $27 for nonsubscribers). For subscription information call (914) 925-0022 or visit the Web site at www.moneypaper.com.
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