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We believe you should not be afraid to continue to add to positions in your portfolio. Yes there will be some euphoria in the stock market when this country succeeds in its mission in Iraq. After that however, we will still have to deal with the economic conditions in this country including stagnant growth and lack of capital spending. There are some specific stocks we have in mind, and we would like to share them with you. Cendant Corporation (CD) $13.75 We like this stock and you know it. These are the people that own Avis Century 21 Howard Johnson Jackson Hewitt With consensus estimates of $1.44 for this year and $1.64 for next year (12/04), the stock will not remain at this price. Key happenings are an increase in free cash flow in the fourth quarter of 2002 of $457 million up from $351 million in the 3rd quarter. The company retired $240 million of debt in the last quarter as well as buying $79 million of stock in the open market. Cendant will now repurchase $125 million of stock per quarter in open market transactions. Cendant should trade into the 20’s over the next several quarters which would only be under 13 times next year’s earnings estimate. Tyco (TYC) $13.05 The new CEO, Edward Breen is from Motorola. The new CFO, David FitzPatrick is from United Technologies. There has been a washout of the Board of Directors, they are all new. The new CEO has publicly stated that he is dedicated to creating shareholder value. He will need to generate trust with Wall Street, and liquidity on the balance sheet. We are looking at $1.42 for 2003 and $1.70 for 2004. We at StocksAtBottom.com believe that $2.00 is lurking out there, because that’s what this company can earn at its next peak. The stock should trade somewhere between 10 and 13 times a potential earnings peak of $2.00. That comes to $20 to $26 per share off a current $13 base. We like it. McDonald’s (MCD) $14.57 With 30,000 restaurants in over 100 countries, McDonald’s is the dominant restaurant chain in the world. A $1.37 this year and $1.46 next year, the stock should trade into the $20’s with any positive news. Management is dedicated to improving the customer experience in the restaurant. Better food quality, faster service, more accurate service, and cleaner restaurants are just some the tasks that the management team is dedicated to. Foreign currency translation is working to McDonald’s advantage as we speak. No matter how hard companies try to hedge against currency fluctuations, it is still difficult to do. McDonald’s tries to buy the commodities it needs in the local currencies of the countries they are in. The company has been able to effectively neutralize about 30 to 35% of the foreign currency effects. At least for this year, it looks like currency fluctuations are working to help increase the earnings of this massive company. A PE ratio of 13 to 17 would lift the stock to the $19 to $24 level. We will be in touch Your Friends At StocksAtBottom.com JOIN NOW |
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