Subject: [NEXTEL-1] Speculations

From: Marcel <[email-masked]>
Date: Tue, 03 Dec 2002 22:28:22 -0500

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Speculations

Source: Forbes

Publication date: 2002-12-09

Arrival time: 2002-12-03

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Portfolio Strategy

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Nextel and Kroger are among the pros' favorites in our annual
stock picking derby.

Let's hope misery loves company. You may have had a bad year in
the market, but the contestants in our annual stock picking contest
have had a positively rotten one. Our bulls merely tracked the
market, with an 18% loss over the past 12 months, while the bears
saw their short-selling picks go the wrong way, rising 17%.

For the past two decades we've made an annual ritual out of
asking a few brave investment professionals to go on the record with
one stock to own or to short. Twelve offer up a buy, five a short-
selling candidate. Winners get a return invitation. During the
previous five rounds, the bears have done well on the whole,
averaging a return 23 points worse than the market. As for the bulls
in the prior five years, their picks have lagged the market by 4
points.

So what went wrong in 2002? For the bulls, the rebound in
technology stocks never quite showed up the way a few thought it
might. Nor did one analyst's bullish call on Enron help matters. For
the bears, expectations of disaster for the likes of Eastman Kodak
didn't quite happen.

There were a few standouts. The star bull: Jean-Marie Eveillard,
a fund manager with First Eagle SoGen Funds. Eveillard bet on
Security Capital, a holding company for real estate investment
trusts. In May that firm was acquired by GE Capital. The deal
entitled Security Capital shareholders to cash and fractional shares
of ProLogis, an Aurora, Co.-based REIT. Eveillard's pick was up 41%
over the 12 months to Oct. 31.

For 2003 Eveillard returns with Tyco International, maker of
things ranging from electrical components to security systems--and
bedeviled by accounting questions and former chairman Dennis
Kozlowski's indictment. "A controversial company," he muses, "but
real businesses." Eveillard says Tyco, if carved up and sold to
other companies, would be worth $25 a share.

A year ago Sandi L. Gleason, a portfolio manager with Los
Angeles' Kayne Anderson Rudnick, chose Syncor International, a
health care outfit specializing in the use of radioactive materials
for treatment and imaging. In June Cardinal Health announced it
would buy Syncor. This purchase has yet to be completed, but her
pick shows a 21% gain.

Gleason now likes the looks of Orthodontic Centers of America,
which provides back-office services to orthodontists. She says
investor qualms about litigation and accounting methodology have
pushed the stock down too far, particularly given growing demand for
the fixing of crooked teeth.

Only one bear is back. Martin Weiner, comanager of the $140
million Comstock Capital Value Fund, deemed Applied Materials too
richly priced last November. Since then the stock is off 19%. Now
Weiner finds KLA-Tencor, another semiconductor equipment maker, also
overpriced at 57 times expected earnings for its fiscal year ending
June 2003.

What about the new recruits? On the short side Patrick Adams,
manager of the $55 million Choice Long-Short Fund, thinks Starbucks'
5,900 stores leave the coffee company little room for expansion. The
stock sells for 36 times its expected earnings for 2003; he
considers 25 a more appropriate multiple.

Patricia Coronado, portfolio manager with New York's Riverside
Capital Partners, targets Omnimedia Group as a short sale, arguing
that expectations for the advertising firm's revenues and net
profits are stretched. The loss of a big account with Gillette also
troubles her, as does the resignation last May of the head of
Omnimedia's audit committee.

The editor of the Nashua, N.H.-based High Tech Strategist
newsletter, Frederick Hickey, says Intel's $115 billion market
capitalization is undeserved. He fears the chip giant has too much
capacity and inventory, given the dim outlook for its customers in
the PC market.

Our last bear, Bernie G. Schaeffer, takes a contrarian tack on
Pfizer. He cites big drugs coming off patent, near unanimous "buy"
ratings from brokerage analysts and a share price below its 80-
month moving average. "In clear bear market territory," Schaeffer
says.

The first of our new bulls, Philip S. Dow, director of equity
strategy with RBC Dain Rauscher, believes Medtronic will continue to
squeeze 13% to 15% profit growth from its medical devices business.
"When people are prescribed a pacemaker," he quips, "they don't wait
for an economic recovery to get it installed."

Richard Driehaus, who oversees $2.6 billion in assets at
Chicago's Driehaus Capital Management, picks Nextel Communications
because of the strong operating profits (earnings before interest,
taxes, depreciation and amortization) it posted in its September
quarter. Driehaus also likes Nextel's declining debt burden and the
increasing market share of its Direct Connect service.

The chief investment officer with New York City brokerage
Ehrenkrantz King Nussbaum, Joseph Kalinowski, goes for Baxter
International, noting that this health care firm has met analyst
profit expectations for eight straight quarters and trades at a
discount to competitors.

Susan Kalla, who covers telecom for the Arlington, Va.-based
Friedman Billings Ramsey, thinks the WorldCom mess will lead to
price stabilization and market-share shuffling in the long-distance
business, and that AT&T will benefit.

Christopher Wolfe, U.S. equities strategist with JPMorgan Private
Bank, sees a bargain in Kroger, the supermarket chain. Joseph Zock,
president of New York's Capital Management Associates, predicts that
Cendant, whose brands include Avis and Ramada, will profit from an
economic rebound.

For updates on these picks go to www.forbes.com/love.

If you could invest in only one stock for an entire year, what
would you choose? Join our discussion board.

Publication date: 2002-12-09

© 2002, YellowBrix, Inc.

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