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Monday, August 14, 2006

Barron’s Round-Up August, 14, 2006 Issue


Cisco reported stronger the expected earnings, continuing a trend that data communications stocks are outperforming computing stocks. The company predicted sales would grow 15% to 20% for the fiscal ending in June 2007.Cisco is in a position to benefit from the large upgrades of telecom systems so that they can handle content like video. Cisco’s margins have stayed at 67% over the last over the last two years despite competition.

Motorola’s may be in a good position to take business from Nokia according to a report in Barron’s. The company’s second quarter numbers were encouraging. Motorola’s new KRZR phone should be a big hit, and an analyst interviewed by the magazine thinks that the shares which are in the low $20s could go to the high $20s if the phone sells well.

The stock of Whole Foods Market has dropped almost 40%. Same store sales came in at only 9.9%, but this was short of expectations. However, the organic food stores still have rapidly growing earnings. Sales of natural foods rose to over 4% of all food sales. The organic food market is growing 13% versus 2.3% for the rest of the food market. With the stock’s drop it now trades at 29 times fiscal 2007 earnings. And, the company has set a goal of having 300 stores and $12 billion in sales by the end of the decade.

Legg Mason Value Trust, run by famous manager Bill Miller, has underperformed the market for the first time in 15 years. Some of his large holdings like Sprint Nextel, UnitedHealth, HealthNet, Google, Amazon, eBay, Yahoo!, Pulte Homes, Kodak, Tyco, and Home Depot. The fund’s holdings in some of these stocks is so large that it would be hard for Miller to get out of them without hurting price. Some individual investors have taken money out of the fund, but institutions are coming in. And, Miller has trailed the S&P at mid-year before and then closed the gap by the end of the year.

Nordstrom caters to high-end shoppers. But, the stock has been down since the beginning of the year due to concerns about consumer spending. However, the wealthy consumers have not stocked shopping. The company’s same store sales rose a healthy 5.3% in July. The Wall St. consensus is for revenue to rise an average of 12% a year over the next five years. The company has a forward PE of only 14.1 times.

Barron’s ran its ratings of the top 100 mutual funds. The top five were Third Millenium Russia, Fairholme Fund, CGM Focus Fund, Boston Company International Small Cap, and Blackrock International Opportunities A.

Sprint’s announcement that it would use WiMax for its fourth generation phones was good for Motorola and Samsung, but was it bad for Qualcomm, which compete for the market on a different platform. The Sprint announcement did drop Qualcomm’s stock. Sprint said that in its evaluation, WiMax was faster and less expensive than Qualcomm’s products. Qualcomm is also quick to point out that it has a number of patents covering WiMax technology, so they claim that they will get royalties anyway.

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