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Monday, July 31, 2006

Barron’ Digest July 31, 2006 Issue


Coach, the luxury goods marketer, will likely raise fiscal 2007 guidance. Investors have been concerned about the profit growth at Coach, and the drop of its stock from a high of $37.40 to the current price of $27.56. The company says that sales have shown positive trends, especially in it stores, during June and July. The company’s new Legacy line has been selling well, according to the company CEO “blowing out” of store.

RoundRock Capital is looking for bargains in natural gas stocks. Among those it likes is Range Resources which has a large inventory of low-risk prospects and efficient costs of finding new reserves. Of the 521 wells it drilled or recompleted in the first half, 99% were successful. The firm also likes Denbury Resources, an exploration and production company which is the largest producer in Mississippi.

El Paso has cut costs and is beginning to grow again. The oil and gas company may be trading at a discount to the aggregate value of its divisions. On that basis, UBS says that the company is worth $19.62 looking at the private value of each of its units. However, the company stock trades at only $15.60.

China’s economic growth could be limited by sever water shortages, political and social problems and major health and environmental issues. Parts of the government structure are also highly corrupt. Rapid credit growth and an investment booms may also lead to profit drops and bankruptcies. The bank system has problems with embezzlement, fraud and bribery. Some analysts also believe that economic confrontation between the US and China is highly likely.

Israeli stocks may do well despite unrest in the area. Many of the company’s large companies sell most of their products and services outside the country. Teva Pharmaceutics has seen its shares rise recently. Many of the largest companies in the country are south of where the major fighting is centered. Check Point Software’s stock has dropped 5% since July 10, but the company now trades at a relatively inexpensive 12 times forward earnings. WR Hambrecht also thinks semiconductor stocks Saifun Semi and PowerDsine could be oversold.

Intel and AMD may be facing a decelerating PC market. More diversifies semiconductor stocks may be better investing bets for the time being. This would include microcontroller makers, Microchip Technology, analog semi companies Linear and Analog Devices and wireless chip company Texas Intruments.

Motorola’s management is talking about overtaking Nokia as the world’s largest cell phone maker. Over the last seven quarters, the company’s global market share has gone from 13.5% to 22.1%. Nokia’s has been flat at 33%. Most of the company’s success in cells has been based on the popular RAZR phone. The company has just introduced seven new handsets to add to the 50 million RAZRs sold since it was introduced.

Tetra Tech, which was hurt by the telecom bust is not focusing on water projects like dams and river cleanups. Analysts think that the company could add 12% to its backlog to more than $1 billion by the end of their fiscal in September. Standard Washington Research Group values that company at $22 compared to a current price of $15.54.

Epoch Investment Partners gives its market Pick and Pans. On the positive list are DeVita, Phonak Holding, OMI, Comcast, C&C Group, Bunge, and China Shineway. The investment firm is negative on AMD.

Douglas A. McIntyre

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