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Monday, October 02, 2006

Barron's Digest October 2. 2006 Issue


Apple's next boost may come from its original business, computers. Mac shipments in the Septmber quarter may be ahead of the 1.5 million that some on Wall St. have forecast.

Petsmart is increasing its pet hotel business. The company, already the largest retail chain of pet food and supplies, finds that when it opens a pet hotel at one of its stores, profitability begins to climb. The stock trades just above $28. Broker Stifel Nicolaus has a twelve-month price target of $33 on the stock.

Some large home builder have used off-balance sheet joint ventures reduce risk when buying land. But, these practices could lead to asset write-downs. Home builders are trying to renegotiate terms of some of their land deals. Lennar, Hovnanian, KB Homes, and Beazer Homes could be especially vulnerable. In each case, equity in joint ventures is a high percentage of book value.

Airline companies may be recovering as carriers cut costs, shrink capacity, and benefit from lower oil prices. Some major carriers including American, US Airways, and United look particularly attractive, based to some extent on 2007 P/E estimates. JetBlue looks expensive.

Verizon revealed details of its plans to roll out fiber to the home which will have more flexible features, like surfing the internet, that offerings from traditional cable companies like Comcast. By the end of 2010, Verizon thinks its could attract seven million internet customers and four million TV customers. If Verizon's plans work, the company will have positive cash flow from there program in 2008.

The scandal at Hewlett-Packard could have one positive result. It would allow the company to substantially upgrade its board now that three members have left.

Douglas A. McIntyre

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