Saturday, August 06, 2005

a few long candidates

3 stocks look pretty interesting to me as long opportunities. Below, a few thoughts on each:

PeopleSupport (PSPT) is a co. that I profiled some time ago. They offer in-bound customer contact services out of the Phillipines. Co. reported a pretty solid Q as far as I can see. Rev growth was strong, client concentration risk is falling, pipeline looks full. PSPT might be selling off on costs to move into a new facility that will affect next 2 quarters and also attrition rates that spiked into the 20% range this past Q. Still, I like this BPO story and the fact that co's rev guidance for the year is pretty tight - 58-60 million. I don't think 60 cents/share in earnings for '06 is out of the question. Applying a 20 multiple to that (not unreasonable with a co. growing 25%/yr) gets you to 12. I'll likely add in the 8.90's.

Constellation Brands (STZ) is a co. that I have done well with in the past. They are a large wine and beer marketer/prodcuer/distributor. Trends are pretty favorable in the U.S and internationally for wine consumption and that is where STZ shines. Co. beefed up its wine line-up with big Australian acquisition of BRL Hardy a few years ago and most recently bought Mondavi. On the beer side, most important product that STZ distributes is Corona/Corona Light. Investors need to be aware of a few negatives or potential negatives to the STZ story -- co. likes to make acquisitions (integration risk), STZ carries a lot of debt (no dividend), worries spring up about beer consumption from time to time (mitigated somewhat by STZ being more concentrated on wine), and wine supply issues. I personally have confidence in STZ management and applaud them on integration of prev. acqs. I also think they have ample opps to improve Mondavi sales internationally. I'll likely add in the 25's. Here's a 2005 annual report to take a look at.

CR Bard (BCR) is a pretty large medical device co. ($6B market cap) that operates in 4 segments (vascular, surgical, urology and oncology). Bard does a good job at product innovation and plows a fair amt. back into R&D. I can see 10% rev/15% eps growth over the next 3 years. I like it a lot around $60. Here is Stifel's take on Bard's MRQ.


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