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Sunday, July 09, 2006

Barron's Digest July 10, 2006 Issue


According to Barron's, Lions Gate, one of the few independent film studios, has been turning out successful movies with modest budgets. The company's film library may be worth as much as the market capitalization of the entire corporation. The company's stock, at $8.60, trades at a relatively inexpensive 13.1 times this years projected cash flow. Shares of Viacom, Disney and News Corp all trade above 18 times on the same measurement. Carl Icahn has also taken a 4% stake in the company.

Barron's profiles the T. Rowe Price New Era Fund (PRNEX). The fund is up 18.52% year to date compared to 2.49% for the S&P 500. Some of the success is due to the fund's investments in stock in the rising commodities sector. These include Statoil, Total, Schlumberger, Potash, and CVRD.

Barron's writes that General Dynamics has seen improvements in its defence business due to the war in Iraq. Its business jet division is also doing well. Last year, the company had a 19% increase in profits to $1.46 billion. However, the company only trades at 16 times 2006 earnings estimates. The company has also continued to increase its dividend and now has a yield of 1.4%. The company's Aerospace division which makes Gulfstream jets contributed 23% of the company's operating profit last year.

Barron's also writes that if hurricane season is not as bad as forecast, several insurance and reinsurance companies may do well. If claims are modest, companies like Allstate, Ace, XL Capital, IPC Holdings, Montpelier Re and Renaissance Re could do better than expected.

Barron's reports that more PC users are setting their computers up with multiple screens. Sanford Bernstein believes that thsi trend could add 5% to 10% to 2006 earnings at Corning. Corning's stock has been hurt along with other companies in the flat panel display market like LG Philips and AU Optronics. Merck KGaA also has a significant portion of the liquid-crystal display market which could have explosive growth in the near-term.

Barron's reports that Wall Street is starting to be bullish on Intel again now that the company seems to be taking market share back from Advanced Micro Devices. However, a number of analysts believe that, because the PC business is not growing quickly and margins at Intel may stay down, investing in the company's shares may not be rewarding.

Douglas A. McIntyre

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