Scott Chase Growth Fund’s Top Stock Picks

Five-star fund manager David Scott says a couple of stocks that are trading at the top of their range still deserve serious consideration by investors.  One of the stocks is in oil services and the other, in cyber-security.  Scott’s Chase Growth Fund is up an average of 8.87 percent per year over the last five years.

Track David’s stock picks at:

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Topping his list is Schlumberger

“We think at this point you should look at it as a growth company,” he told CNBC.  “Looking out over the next several years, regardless of where oil trades…this company, because of its world position…its strong balance sheet, tis broad array of products, will have a strong 20+ percent growth rate.”

Scott agrees that Symantec is trading at its 52-week high.

“I think that speaks to the fact that the company’s done very well in a fairly difficult environment,” he said. “The market for anti-virus and maintenance software is strong, and will stay strong regardless of the economy.”

Hodges Capital Management Top Picks

With Gustav apparently heading for America’s oil and gas fields in the Gulf of Mexico, Eric Marshall says there are some swiftly-developing opportunities for investors.

“We wouldn’t buy or sell a stock based on a single weather event, but one area that we do like long-term is the natural-gas stocks,” the Hodges Capital Management portfolio manager told CNBC.

track his picks at:

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Not just any natural-gas stocks, of course.

“The most obvious ones that could benefit from a disruption in the Gulf would be the land-based natural-gas producers, like Chesapeake, XTO, or a more aggressive name like GMX Resources;” he said.

Marshall sees those stocks continuing to do well, with forecasters predicting a cold winter.

“The hurricane could only potentially help them,” he said.

Investment Banking Analysts Stock Picks

1. Raymond James analyst Budd Bugatch rates Williams-Sonoma’s a BUY:

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Second quarter adjusted EPS of .08 beat his $0.06 estimate and $0.07 consensus on better-than-forecast cost control and lower tax rate.

But Bugatch notes that same-store sales fell 11.7%, retail revenue fell 4.9% and direct-to-consumer revenues were down 4.3%. He says the greatest declines appear to be in Pottery Barn and Pottery Barn Kids.

He notes that the company lowered its $1.45-$1.58 ($1.31-$1.44 adjusted) fiscal year 2009 (January) GAAP EPS forecast to $1.03-$1.15 ($0.89-$1.01 adjusted). He says about two-thirds of the reduction comes from lower forecast retail revenues; catalog circulation will fall by 18%-20% year-over-year.

The analyst notes that management is extremely cautious about its fiscal year 2010 outlook, and reduced expected square footage growth to 5% from 7%.

UBS Financial analyst Ronald Barone rates Energen a BUY:

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Analyst says the Energen upgrade reflects his constructive outlook for natural gas fundamentals and his belief that EGN (and other integrated gas stocks) has seen excessive valuation compression with the recent pullback in commodity prices and sector rotation out of energy. He notes that prior to today’s opening, EGN shares were down 30% from late June.

Barone says he remains attracted to EGN’s lower-risk upstream strategy. He says positive fundamentals include: visible earnings growth and rising free cash flow, significant hedging of 2008-2010 production, and EGN’s under-appreciated exploitation program and long-lived reserves.

He sees EPS of $4.58 for 2008 and $5.88 for 2009. He has an $80 price target on the stock.

Real Wealth likes Titanium and Thompson

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“Obscured in the long shadow cast by towering gold and platinum, a little-known collection of other rare metals is sprouting and shooting up like Jack’s beanstalk right under investors’ noses,” says Larry Edelson.

Here, the natural resources expert and editor of Real Wealth takes a look at companies involved in lesser-know metals that are increasingly important to to high technology world.

Track Real Wealth’s picks at:

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“With some notable exceptions, rare metals aren’t generally of much use by themselves. But in combination with more common metals, their unusual chemical properties allow the creation of ’super-alloys’ with extraordinary capabilities needed for cutting-edge technologies.

“The more obscure metals may not be as sexy as the precious metals and certainly don’t get as much attention. But  they enable many technologies vital to modern industry.

“For example, to combat soaring fuel costs that threaten its very survival, the airline industry desperately needs turbines that can run at much higher temperatures and RPMs. Rare metals are used all around us — in cars, TV screens, cell phones, computers, and a host of other devices we may not see or even know about.

“There are no world market exchanges for most rare metals. Prices and transactions for minor metals are negotiated directly between producers, wholesalers, and fabricators.

“It’s a relatively thin market (compared to the volume traded in base metals), which makes pricing highly volatile and vulnerable to even small variations in supply/demand dynamics. Price moves of 300%, 500%, 800% and more have been common in recent years.

“The profit opportunities lie in the companies that produce and use rare metals: junior explorers, major miners, processors, producers (which make specialty metals), and integrators and recyclers.

“For starters, I want to focus on titanium and molybdenum, two rare metals whose price outlook is very positive. Titanium Metals, a world leader in titanium production.

“Earnings are down, not surprisingly, due largely to the lackluster U.S. economy and airline industry. But the company’s share price is also cheap now, trading at the $11 level, near two-year lows — and a good long-term bet on a solid company in a very unique space.

“Thompson Creek Metals Company, one of the largest publicly traded, pure molybdenum producers in the world. The company owns the Thompson Creek open-pit molybdenum mine and mill in Idaho.

“The company also has a 75% share of the Endako open-pit mine, mill and roasting facility in northern British Columbia; and a metallurgical roasting facility in Pennsylvania.

“TC’s second quarter 2008 saw higher production volumes, with molybdenum production rising 10.7% to 6.2 million pounds and up 37.7% over 2007. Net income in the second quarter jumped 29.1% to $60.4 million.

“Despite these great results, Thompson Creek’s share price is trading at the $12 - $13 level, less than half its peak of $27.09 set last November. I think the shares can easily get back to the $23 level in the next six months — and move to new record highs shortly thereafter.”

Forbes ETF Trader Recommends iShares Japan

With the Dow ‘on a roller coaster, Jim Lowell looks to Japan for a new ”best buy” fund recommendation. In The Forbes ETF Trader, he looks at the US economy and a Japan ETF.

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“The Fed is walking a fine but knowing line between recession, stagflation, and inflation. To avoid a 1970s debacle, Bernanke has restrained money growth at home while other central banks have allowed money to flood their own economies.

“Australia, Sweden, Canada and Britain are showing money growth that is two or more times that of the US.

“I do think that stagflation-like pressures remain, and that while the Fed isn’t printing money willy-nilly, it is heading in that direction with a new kind of printer: the American tax payer.

“The unprecedented bailouts of non-government entities with out tax dollars that we’ve witnessed so far this year are problematic on many levels.

“Moreover, the government’s bailout plan of the US consumer (by way of writing stimulus checks thanks to our future tax dollars), is the biggest sub-prime loan of all.

“And while the’ ‘experts’ say that all the above bailouts were necessary to avoid one version of a market meltdown or another, I’d argue that propping up failed systems is the biggest systemic risk that we face.

“Meanwhile, among our latest ‘do it now’ recommendations, we suggest buying the iShares MSCI Japan.  The MSCI Japan Index is designed to represent performance of the Japanese equity markets biased to the larger cap names at its top.

“Japan is not only the world’s second largest economy (despite an epic recession which would have crushed many economies into non-existence), it’s a recovering and growing one which not only stands at the gateway to China, but as the gateway to it. While the Japanese stock marksetting on this global titan.”

InvesTech Market Analyst Recommends Charles Schwab

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“We continue to apply our value-oriented principles in selecting new growth stocks as we look for companies with superior profitability and strong balance sheets,” says Jim Stack.

In his InvesTech Market Analyst, he and analyst Bruce Morison explain, “Our latest featured investment, Charles Schwab, is a prime example and stands out as a conservative way to access to opportunities in the battered financial group.”

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“We are increasing our equity allocation in stocks that should show strong relative performance in a market upturn.

“We continue, however, to be very selective in terms of quality, as well as downside risk. Over the past 20 years, brokerage/asset management firms have produced more than twice the return of the market following a bear market.

“The Charles Schwab brand is one of the most well-known and trusted names in the financial services industry. Its strategy is to be competitively priced, but more importantly to be positioned as the gold standard in client service and integrity.

“Over the past five years the company has aggressively diversified away from its dependence on trading commissions in favor of fee business in asset management, banking, and advisory services.

“Today, less than 20% of net revenue comes from trading, while the other businesses are producing an enviable and consistent revenue stream that is growing at double-digit rates.

“This sound diversification strategy has generated strong earnings results. On an annualized basis, Schwab’s earnings have grown in excess of 25% per year over the past five years.

“While this explosive growth will be hard to duplicate, sustainable earnings growth is forecast to be in the range of 15%-18%. The company also has a solid balance sheet with long-term debt comprising less than 20% of the firm’s capitalization.

“Our valuation analysis suggests the company’s share price is significantly undervalued as the stock is currently trading near a twelve-year low in terms of valuation metrics.

“The stock is out of favor with investors primarily due to concerns about the volatile equity markets and a lawsuit that has been filed on behalf of Schwab customers who allege they were misled about the safety of a mutual fund that invested in mortgage-backed securities.

“In addition, investors have recently become concerned about the firm’s exposure to auction-rate securities. Regulators are questioning 40 major brokerages about their role in marketing these debt-backed securities, which became illiquid when the auction market dried up.

“In particular, the New York Attorney General is looking at what representations the brokerages made to their customers. Schwab was never an underwriter of the products.  According to the company it only acted as an agent, buying at the request of a client, and never actively marketed the products to its customer base.

“Despite these issues, the success of the firm’s diversification efforts and growing brand name recognition, coupled with its attractive valuation and the industry’s potent performance in post bear market environments, make Schwab a compelling investment for the InvesTech portfolio.”

Eaton Vance Special Equity Fund’s Top Stock Picks

Nancy Tooke argues that investors can find big things in small-cap stocks, and she has a couple of names she thinks will bear that out.  Her four-star Eaton Vance Special Equity Fund is up an average of 16.02 percent per year over the last three years, and even shows a 3.05 percent appreciation year-to-date.

Track Nancy’s picks at:

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Her first pick is Gildan Activewear

“At this particular point, while the customer is cutting back, the customer is buying necessities, and Gildan actually sells underwear,” Tooke told CNBC.  “No soccer mom in the United States is going to send her kids out on the soccer field with holey socks.”

She sees other pluses in Gildan as well.

“This is a very well-managed company, and it has been a high-growth company in the past,” she said.

She also likes solar-energy company Renesola

“We have been looking for ideas in the alternative-energy space,” she said.  “It seems that regardless of who wins the presidential election, that’s going to be an area of emphasis in both platforms, and Renesola is a cheap stock in a very good neighborhood.”

Insiders Plus Recommends Anglo American

“I remain long-term bullish on gold,” says Jack Adamo in his Insiders Plus. Here, the advisor offers his outlook on gold as well as gold miner, Anglo American PLC.

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“If history is a guide, gold should start a sustained upmove about a year before the stock market does the same.

“Near-term, gold has been weak, as the market is focusing on recession now — which suggests to investors that they don’t require an inflation hedge. In addition, demand for gold jewelry should be weak this Christmas season.

“On the technical side, I’m starting to see some of the speculative money come out of gold, but there’s quite a way to go. I don’t reveal my proprietary criteria, but I will say that the measures I track have been very out of whack for a while, and as such, have been less useful than they’ve been in the past.

“They are now moving toward normalcy. If they continue at the pace we’ve been seeing recently, we could get another short-term buy signal as early as mid-September. Then I would consider putting on another gold position.

“But these indicators are strictly short-term. They may help us to put on a new position at a better price, but they don’t tell us anything about the long-term outlook. For that, you have to look at the fundamentals.

“AngloAmerican reported first half revenues up 9.7% and underlying earnings per share up 44% to $2.89 vs. $1.98 last year. Underlying earnings exclude some items like gains or losses on sales of assets, but net earnings were even higher. The company expects a strong performance in the second half.

“The question with all the mining companies is how they’ll hold up through the recession. AngloAmerican’s stock never went crazy, so I think it will weather the pullback reasonably well. Its chart looks better than most in the group, and it’s selling for less than six-times earnings. We’ll continue to ride this horse.”

Dow Theory Forecasts Recommends IBM

“For more than a decade, IBM lived up to its reputation as a slow-growing, stodgy company,” says Richard Moroney. The editor of the blue chip advisory, Dow Theory Forecasts , contends, “But over the last 12 months, the picture changed. Strong operating momentum is now propelling genuine operational growth despite US economic weakness.

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“Acquisitions and cost cuts have accounted for most of IBM’s growth in recent years. In the 10 years ended 2006, sales increased at an annualized rate of less than 2%, and the company lost both market share and influence.

“However, sales growth has accelerated in each of the last three quarters, and per-share profi ts have risen at least 23% in each period. Consensus estimates, trending upward over the last month, project per-share-profit growth of 24% in 2008 and 11% in 2009. IBM is a Focus List Buy and a Long-Term Buy.

“A broad business mix has helped the company keep growing during the economic slowdown. IBM may still be best known for its hardware, but the company’s strength over the last year has stemmed from the services and software businesses, which tend to be less economically sensitive than hardware.

“Hardware accounted for about 18% of sales in the six months ended June, while services represented 58% and software generated 20%. Financing operations brought in most of the last 4%.

“While the current economic climate has pinched the consumer, companies are still investing heavily in new technology. IBM’s products and services help customers improve efficiency, productivity, and security, which in turn can reduce costs. In the six months ended June, IBM’s revenue rose 12%, while per share-profi ts jumped 34%. Revenue from services increased 17% in the six-month period.

“In the June quarter, IBM signed $14.7 billion in service contracts, up 12%, increasing the services backlog to $117 billion, nearly twice annual services revenue.

“Software revenue jumped 15% in the six months ended June. Services and software growth more than offset a 2% decline in revenue from the systems and technology unit, which produces servers and other hardware.

“IBM is also benefiting from its strong presence overseas, particularly in emerging markets. Foreign sales accounted for 63% of 2007 revenue, a percentage likely to increase in coming years.

“Emerging markets — such as Brazil, Russia, India, and China, which combined to post a 31% sales gain in the June quarter — represent a strong growth opportunity for IBM. The company is investing heavily in the four huge countries, as well as in Eastern Europe and the Middle East.

“Management expressed concern about economic weakness in some of the world’s largest developed markets, including the U.S., but that worry has been factored into growth expectations.

“IBM targets per-share profits of $10 to $11 in 2010, representing annualized growth of 12% to 16% from 2007 levels. Given its growth prospects, the stock seems attractively valued at 13 times estimated year-ahead earnings, below the five-year average forward P/E ratio of 15.”

Next Inning Recommends Analog Devices

“I think Wall Street has made a poor assessment of Analog Devices ,” says tech guru Paul McWilliams. Here’s a look at from his top notch Next Inning newsletter.

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Analog Device’s top line guidance came in a bit below Wall Street expectations. However, I think the problems are between the Hudson and East Rivers and not in Norwood, MA, the home town of ADI.

“What Wall Street appears to be missing is that since ADI has sold off some of its lower profit business units, its seasonal sales patterns have changed. ADI is now again driven by industrial market sectors much more than it was even just last year.

“Therefore, its conservative guidance of flat to up 3% sequentially shouldn’t have been a big surprise nor a cause for concern. As a matter of fact, with its minimal exposure to PC and consumer markets, I think flat to up 3% is pretty good.

“What Wall Street would be better to focus on are the operational improvements ADI has made. In its July quarter, ADI improved its pro forma operating margin to 26.5% from 26.2% last quarter and again reduced its inventory, which sits now at the lowest level we’ve seen since 2004.

“If we look back at last year and include the results from divested businesses, its operating margin was only 22.8%.

“In addition to this, ADI has nearly replaced all of the low margin revenues from divested businesses with higher margin revenues. Including divested businesses in the July 2007 quarter, ADI reported revenues of $680.3M.

“Excluding those businesses in the July 2008 quarter, ADI reported sales of $659M, a very modest 3% decline. However, when we look at pro forma gross profit dollars, ADI generated $403.7M in the July quarter this year versus $391.1M last year. If this is bad, I want more bad.

“In my prior review of the stock I wrote that it was time to hold off on accumulating shares of ADI due to the price appreciation we had seen from buy recommendations made earlier in 2008 .

“I now believe it’s now time to accumulate shares again at the current price of $28.91 and follow through to as high as $31.”