Wednesday, December 20, 2006
10 stocks that could outperform in 2007
10 stocks that could outperform in 2007
By Leslie Wines, MarketWatch
Last Update: 12:01 AM ET Dec 19, 2006
NEW YORK (MarketWatch) -- Investors seeking outperforming stocks in 2007 will likely focus on factors such as exposure to the booming China market, unjustifiably low valuations, promising products under development and the most lucrative locations for drilling rigs, according to some noted stock pickers and fund managers.
DAVID CALLAWAY
Next year's news
Never doubt the market’s ability to focus on something completely opposite from what Wall Street thinks is important. So Dave's predicting a big-cap rally and commodities slowdown in 2007.
• Best & worst stocks of 2006
• 10 stock picks for 2007
• Commodities: Sweeter in 2007?
• Our top news stories of 2006
• Loeb: Slowdown, not meltdown
• Winners & losers
• Dvorak: Top tech trends in 2007
• The stock-option surprise
• Tech sequels: Big stories go on
• See the full special report
Coming up this week: The outlook for real estate, the economy, more.
Though forecasting price performance remains a slippery art, the stock pickers at least have come up with plausible theories as to why these stocks could break into higher ranges next year. Here follow their choices in no particular order:
United Technologies
United Technologies Corp. (UTXUnited Technologies Corporation
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
UTX ) . This old standard was chosen by Daniel Manion, who manages a large-cap blend fund of growth and value stocks for Sentinel Asset Management, as a new twist on a China play.
United Technologies' product list of elevators, escalators, moving walkways, residential and industrial heating systems and air conditioners has positioned it to take advantage of the construction surge in China and elsewhere, according to Manion.
General Electric
Another old-line company General Electric Corp. (GEGeneral Electric Company
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GE ) was the top 2007 choice of Mike Holland, who manages the Holland Balanced Fund which consists entirely of large-cap blue-chip stocks.
GE Chief Executive Jeff Immelt has generated generally strong earnings growth in recent years, but the stock price has languished in a dull range. In Holland's view, GE should have benefited more from the recent large-cap equities rally and investors are likely to recognize this and send the stock higher next year.
Southwest Airlines
Another stock chosen because it largely missed this year's rally was Southwest Airlines Co. (LUVSouthwest Airlines Co.
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
LUV ) . Don Hodges, co-manager of the multi-cap Hodges Fund, pointed out that Southwest did not rally as much as some other airline stocks in 2006 but thinks the situation will turn around in 2007.
"Southwest still has the best business model in the industry and is picking up some new routes," Hodges said. This year, Congress removed the Wright Amendment which had limited Southwest's direct flights to states contiguous or near Texas, greatly expanding the number of direct flights the airline can offer.
Transocean
Provider of offshore drilling equipment Transocean Inc. (RIGtransocean inc ord
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
RIG ) also was put forward by Hodges. The maker of drilling equipment should perform well next year, irrespective of whether energy prices rise or fall, as rigs are very expensive and take a long time to produce, while supply lags demand, he said.
Rowan Companies
Another oil rig play, suggested by Kevin Shacknofsky, co-portfolio manager of the Alpine Dynamic Dividend Fund, was Rowan Companies Inc. (RDCRowan Companies, Inc
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
RDC ) .
The stock bears a low 1% dividend, but Shacknofsky believes it is poised to report strong earnings next year. In addition to the favorable supply-demand ratio in the industry, Rowan Companies has been diversifying its fleet locations, sending some rigs out of the Gulf of Mexico to other international waters that offer more lucrative rig day rates.
Gatehouse Media
Gatehouse Media Inc. (GHSgatehouse media inc com
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GHS ) , an owner of rural newspapers which the Fortress Investment Group hedge fund brought to market in October, was another Shacknofsky pick. The stock bears a 6% dividend. Gatehouse also is in acquisition mode and should raise its dividend if it makes more cash flow accretive purchases, he said. In addition, the company's online strategy should allow it to capitalize on internet-based advertising as the field extends to smaller papers, in his view.
Gilead Sciences
Gilead Sciences Inc. (GILDGilead Sciences Inc
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GILD ) , a leading developer of treatments for HIV and other diseases, was the top larger-cap pick of Jason Kantor, the leading biotechnology analyst at RBC Capital Markets.
There should be positive developments next year with the integrase inhibitor HIV treatment Gilead is now developing, which should send the stock higher, he thinks.
In addition, the company sells its products directly around the world, giving it an advantage over domestically-focused biotech companies, according to Kantor.
Alexza Pharmaceuticals
Alexza Pharmaceuticals Inc. (ALXAalexza pharmaceuticals inc com
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
ALXA ) , a small-cap manufacturer of drug inhalers to treat such varied maladies as schizophrenia and migraines, is another of Kantor's picks. Data from development projects for new Alexza drugs should benefit the company's stock price next year, Kantor said.
Goodrich
Goodrich Corp. (GRGoodrich Corp
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GR ) was the choice of Jeff Kleintop, Chief Investment Strategist at PNC Wealth Management. The former tire maker has transformed itself into a manufacturer of airframe, engine and electronic parts for aircraft. New routes to help serve Asia and other developing regions, and an upsurge in orders for aircraft manufacturers Boeing Co. (BABoeing Co.
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
BA ) and EADS (FR:005730: news, chart, profile) division Airbus, spell higher demand for jet components in 2007, according to Kleintop.
Krispy Kreme
Last is Krispy Kreme (KKDkrispy kreme doughnuts inc com
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
KKD ) , which was put forward by Don Hodges, who admitted the stock is "a somewhat speculative bet."
However, Hodges thinks Krispy Kreme might be a good play for investors willing to accept some risk.
The doughnut maker remains mired in legal and regulatory issues, but Hodges thinks it will sort many of these out as 2007 wears on and that the stock price could improve late in the year. In addition, Krispy Kreme outlets increasingly are operated as franchises and franchisees tend to do a better job as operators, he said.
By Leslie Wines, MarketWatch
Last Update: 12:01 AM ET Dec 19, 2006
NEW YORK (MarketWatch) -- Investors seeking outperforming stocks in 2007 will likely focus on factors such as exposure to the booming China market, unjustifiably low valuations, promising products under development and the most lucrative locations for drilling rigs, according to some noted stock pickers and fund managers.
DAVID CALLAWAY
Next year's news
Never doubt the market’s ability to focus on something completely opposite from what Wall Street thinks is important. So Dave's predicting a big-cap rally and commodities slowdown in 2007.
• Best & worst stocks of 2006
• 10 stock picks for 2007
• Commodities: Sweeter in 2007?
• Our top news stories of 2006
• Loeb: Slowdown, not meltdown
• Winners & losers
• Dvorak: Top tech trends in 2007
• The stock-option surprise
• Tech sequels: Big stories go on
• See the full special report
Coming up this week: The outlook for real estate, the economy, more.
Though forecasting price performance remains a slippery art, the stock pickers at least have come up with plausible theories as to why these stocks could break into higher ranges next year. Here follow their choices in no particular order:
United Technologies
United Technologies Corp. (UTXUnited Technologies Corporation
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
UTX ) . This old standard was chosen by Daniel Manion, who manages a large-cap blend fund of growth and value stocks for Sentinel Asset Management, as a new twist on a China play.
United Technologies' product list of elevators, escalators, moving walkways, residential and industrial heating systems and air conditioners has positioned it to take advantage of the construction surge in China and elsewhere, according to Manion.
General Electric
Another old-line company General Electric Corp. (GEGeneral Electric Company
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GE ) was the top 2007 choice of Mike Holland, who manages the Holland Balanced Fund which consists entirely of large-cap blue-chip stocks.
GE Chief Executive Jeff Immelt has generated generally strong earnings growth in recent years, but the stock price has languished in a dull range. In Holland's view, GE should have benefited more from the recent large-cap equities rally and investors are likely to recognize this and send the stock higher next year.
Southwest Airlines
Another stock chosen because it largely missed this year's rally was Southwest Airlines Co. (LUVSouthwest Airlines Co.
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
LUV ) . Don Hodges, co-manager of the multi-cap Hodges Fund, pointed out that Southwest did not rally as much as some other airline stocks in 2006 but thinks the situation will turn around in 2007.
"Southwest still has the best business model in the industry and is picking up some new routes," Hodges said. This year, Congress removed the Wright Amendment which had limited Southwest's direct flights to states contiguous or near Texas, greatly expanding the number of direct flights the airline can offer.
Transocean
Provider of offshore drilling equipment Transocean Inc. (RIGtransocean inc ord
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
RIG ) also was put forward by Hodges. The maker of drilling equipment should perform well next year, irrespective of whether energy prices rise or fall, as rigs are very expensive and take a long time to produce, while supply lags demand, he said.
Rowan Companies
Another oil rig play, suggested by Kevin Shacknofsky, co-portfolio manager of the Alpine Dynamic Dividend Fund, was Rowan Companies Inc. (RDCRowan Companies, Inc
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
RDC ) .
The stock bears a low 1% dividend, but Shacknofsky believes it is poised to report strong earnings next year. In addition to the favorable supply-demand ratio in the industry, Rowan Companies has been diversifying its fleet locations, sending some rigs out of the Gulf of Mexico to other international waters that offer more lucrative rig day rates.
Gatehouse Media
Gatehouse Media Inc. (GHSgatehouse media inc com
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GHS ) , an owner of rural newspapers which the Fortress Investment Group hedge fund brought to market in October, was another Shacknofsky pick. The stock bears a 6% dividend. Gatehouse also is in acquisition mode and should raise its dividend if it makes more cash flow accretive purchases, he said. In addition, the company's online strategy should allow it to capitalize on internet-based advertising as the field extends to smaller papers, in his view.
Gilead Sciences
Gilead Sciences Inc. (GILDGilead Sciences Inc
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GILD ) , a leading developer of treatments for HIV and other diseases, was the top larger-cap pick of Jason Kantor, the leading biotechnology analyst at RBC Capital Markets.
There should be positive developments next year with the integrase inhibitor HIV treatment Gilead is now developing, which should send the stock higher, he thinks.
In addition, the company sells its products directly around the world, giving it an advantage over domestically-focused biotech companies, according to Kantor.
Alexza Pharmaceuticals
Alexza Pharmaceuticals Inc. (ALXAalexza pharmaceuticals inc com
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
ALXA ) , a small-cap manufacturer of drug inhalers to treat such varied maladies as schizophrenia and migraines, is another of Kantor's picks. Data from development projects for new Alexza drugs should benefit the company's stock price next year, Kantor said.
Goodrich
Goodrich Corp. (GRGoodrich Corp
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
GR ) was the choice of Jeff Kleintop, Chief Investment Strategist at PNC Wealth Management. The former tire maker has transformed itself into a manufacturer of airframe, engine and electronic parts for aircraft. New routes to help serve Asia and other developing regions, and an upsurge in orders for aircraft manufacturers Boeing Co. (BABoeing Co.
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
BA ) and EADS (FR:005730: news, chart, profile) division Airbus, spell higher demand for jet components in 2007, according to Kleintop.
Krispy Kreme
Last is Krispy Kreme (KKDkrispy kreme doughnuts inc com
News , chart, profile, more
Delayed quote dataAdd to portfolio
Analyst
Create alertInsider
Discuss
Financials
Sponsored by:
KKD ) , which was put forward by Don Hodges, who admitted the stock is "a somewhat speculative bet."
However, Hodges thinks Krispy Kreme might be a good play for investors willing to accept some risk.
The doughnut maker remains mired in legal and regulatory issues, but Hodges thinks it will sort many of these out as 2007 wears on and that the stock price could improve late in the year. In addition, Krispy Kreme outlets increasingly are operated as franchises and franchisees tend to do a better job as operators, he said.
# posted by Logan Ramasamy @ 10:47 AM 
