Sunday, September 12, 2010

Barron's Summary

Saturday, September 11, 2010 1:25:14 PM
 Barron's Summary: Positive on XRX, INTU, cautious on VWM
- Xerox appears on the cover of Barron's which is positive on the name. Barrons comments on the acquisition of Affiliated Power which has increased revenues from service to 50% from 23% and is already paying off. Furthemore, Xerox has repeatedly seen increases in earnings beating estimates and the cash flow has been increasing despite the recession. Wall Street has not yet grasped Xerox's new business and the stock is trading at a modest valuation and a cheap multiple. Citing an analyst at Seligman Investments, Barron's says that the company is expected to increase operating margins to the low teens from 10% and its stock could double.
- Cautious article on VMWare. Wall Street analysts still expect strong earnings growth but a threat may come from competitors such as Adobe, Microsoft, Oracle who are more seasoned that the company. Barrons notes that the stock trades at a pricey $85 or 61 times this year's expected earnings, which leaves the stock susceptible to the smallest glitch.
- Positive feature on Intuit the developer of personal-finance applications like Quicken and TurboTax. The company is poised to benefit from the rising demand for affordable accounting and other companies to help run smaller businesses. Despite the fact that the stock is not very cheap at 16 times its expected earnings, it is still cheaper than its competitors such as or NetSuite who serve large corporate customers. Barron's expects the stock to rise as much as 25% over the next year.
- Barrons features an article on Tech companies which have been reporting better profits than the rest of the corporate America, but paying unattractive dividend yields. With many investment strategists looking to park money in high dividend stocks, this could be hurting tech firms, whose shares have fallen to their lowest value relative to the S&P since early 1991.
- The head of Global Macro and Asset Allocation for Morgan Stanley Investment Management, Henry McVey interviews for Barron's and notes that the economy is in a secular bear market with the next headwind being the debt overhang in the developed economies. McVey says that investors should look for companies that have rising returns on capital, improving dividends and a strong earnings growth such as McDonald's, Automatic Data Processing and Caterpillar. Outside the U.S., Mc Vey remains focused on growth areas, including the emerging markets such as Turkey, Indonesia and India while Germany still looks attractive as an exporter. According to McVey, the most important point in asset allocation nowadays is to think in terms of pro-growth, anti-growth and trades for all seasons

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