Best Stocks for 2004 - Zacks Investment Research

[Pages:10]4Best

Stocks for 2004

Brought to you by

Best 4 Stocks for 2004

If you want to gain the insight and knowledge of reputable and proven investment experts experts who beat the market consistently every year youve come to the right place at . Zacks represents more than 60 of the best performing newsletter editors in the business who regularly share their market commentary and more important their top stock picks. Thats why at Zacks, you can Profit from the Pros. This report delivers the best four stock recommendations from Zacks experts for 2004, complete with their analysis of why these stocks are such special investment opportunities. Youll see a variety of stocks here value, biotech, small caps, blue chips. So read on to learn why these four stocks are the best for 2004.

Table of Contents

Adolor Corp (ADLR) from The Biotech Stock Report . . . . . . . . . . . . . . . . . . . . . . Page 3

Agco (AG) from Find Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 4

UST, Inc. (UST) from Investment Quality Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 6

KOS Pharmaceuticals (KOSP) from Oberweis Report . . . . . . . . . . . . . . . . . . . . . . . page 8

Zacks Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 9

Other Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10

For the resources you need to Profit from the Pros, visit .

2

Adolor Corp. (ADLR)

Recommended by Nadine Wong of The Biotech Stock Report

Adolor Corp. (NASDAQ: ADLR) is developing pain treatments and treatments that manage the side effects associated with common pain medications. Adolors lead product candidate, Entereg (alvimopan), is an oral drug designed to selectively block the unwanted effects of opioid analgesics on the gastrointestinal (GI) tract, a condition referred to as opioid bowel dysfunction (OBD). Adolor has conducted three of the four Phase III trials three efficacy studies and one safety study for Entereg for the treatment of postoperative ileus (POI), a form of bowel dysfunction that frequently follows abdominal surgery when opioids are used for pain relief. POI often leads to prolonged hospital stay.

The three efficacy studies (302, 313, and 308) are double-blind, placebo controlled, multicenter studies each designed to enroll patients scheduled to undergo certain types of major abdominal surgery and to receive opioids for pain relief. The primary endpoint in these three studies is a composite measure of the time to recovery of both the upper and lower gastrointestinal functions, whichever occurred last, as defined by time to tolerability of solid foods and time to first flatus or first bowel movement.

Top-line results from the first study, 302, were announced in April 2003 and the second study 313, were announced in September 2003. In both studies Entereg demonstrated significant improvements in restoring gastrointestinal function compared to placebo-the studies primary endpoint. Furthermore, Entereg demonstrated between a 14- and 20-hour reduction in hospital stay at the 6 mg and 12 mg doses.

Enrollment in the final study, 308, is targeted for completion in the fourth quarter of 2003 with data possible in the first quarter of 2004. Study 308 includes patients scheduled to undergo small bowel resections, large bowel resections or simple or radical hysterectomies. Based on the previous two efficacy studies, 308 should follow the same successful path.

On October 22, 2003 Adolor announced top-line results of its 519-patient Phase III clinical safety study 306 of Entereg in POI. The primary objective of this study was to evaluate the safety of Entereg 12 mg administered twice a day for seven postoperative days in subjects undergoing total abdominal simple hysterectomy in a placebo-controlled observational safety study. The results indicated that Entereg was safe and well tolerated by the patients.

The large Phase III program should provide conclusive evidence of Enteregs efficacy and sufficient patient experience for the Food and Drug Administration (FDA) to determine its safety and effectiveness. The positive data from three Phase III studies in POI should support a new

For the resources you need to Profit from the Pros, visit .

3

drug application filing in the first half of 2004. With a 12-month review time period, FDA approval could happen in the first half of 2005.

There are currently no effective treatment options for POI; it is a smaller market opportunity relative to the chronic pain applications of Entereg. POI is a $500 million U.S. opportunity compared to an over $1.0 billion chronic OBD and over $1.5 billion irritable bowel syndrome market opportunity. There are no effective therapies for treating or preventing OBD and over-thecounter and prescription laxatives and anti-emetics provide only limited efficacy. Adolors Entereg is the most advanced clinical candidate for POI that directly targets the cause of OBD.

Adolors Entereg is an exciting new treatment for POI. Currently, Adolors share price has moved towards its 50-day average of about $17 due to market conditions that is a good entry point with a 12-month target price of $26.

About Nadine Wong of The Biotech Stock Report

The Biotech Stock Report combines investing acumen and medical research expertise to identify the companies and their products that can turn medical miracles into investment successes. This unique approach has paid off handsomely for subscribers. In fact, the BioPortfolio has delivered gains year-to-date in 2003 of +44.5%, beating the Nasdaq returns of +42.2%. The Biotech Stock Report has generated total gains of +380.4% since inception in March 1997.

Nadine Wong has a MBA from Simmons College, Boston, MA and writes the weekly biotech column for . She has also been featured in the Dick Davis Digest for the Best Minds on Wall Street.

Learn more about The Biotech Stock Report and how you can try it free for 30 days and get more winning stock picks like this. Plus, get immediate access to current issues and special reports. Click here now.

Agco (AG)

Recommended by Bill Martin and Matt Ragas of Find Profit

Sparked by Alan Greenspans printing press, the U.S. governments aggressive fiscal stimulus, and inflationary policies at many of the worlds largest central banks, the global economy is now clearly on a path of reflation. This is evident in the GDPs new 7.2% growth number, the rise in the GDP deflator (an inflation indicator) from 1.1% to 1.7%, and the massive year-long rallies that weve seen in everything from soybeans to copper to gold.

One of the biggest beneficiaries of reflation is the agricultural industry. For years, farmers have struggled under the weight of global deflation and zero pricing power. Now thats changing, and helped along by increasing farming subsidies in many major countries, farmers are seeing their finances and balance sheets improve. This is particularly the case in North and South America, thanks to the weak dollar, which has improved the competitiveness of dollar-based agricultural products. Chinas boom has also increased demand for commodities.

For the resources you need to Profit from the Pros, visit .

4

A clear beneficiary of this is Agco (AG). AG is one of the worlds largest farming equipment manufacturers, with operations in the U.S., South America and Europe. AG has already benefited from this emerging reflation, with Q3 worldwide revenues up 16% to $800 million and Q3 earnings up 69% to 22 cents per share.

Despite this uptick, shares of AG remain -33% below their 52-week high that was reached late in 2002. The primary reason for this weak performance has been Europe, where AG derives 45% of its sales. Thanks to a red hot euro, and a terrible drought this past summer, AGs European operations have struggled and have had the effect of offsetting some of the strength seen elsewhere in AGs businesses.

In typical fashion, Wall Street has avoided AG because of the weakness in Europe. We think thats shortsighted. In our view, its now time for the global reflation cycle and economic turnaround to extend to Europe, and we expect the euro to soon stabilize and stop appreciating against other currencies. Combined with a rebound from this past summers drought conditions in Europe, even just a modest pickup in AGs European business could send this stock much higher. We think a pickup is quite likely, and we think that pickup could prove to be stronger than many expect.

At todays $17.84 per share, AG trades at roughly 17x 2003 earnings. Looking ahead, analysts expect AG to earn $1.70 per share in 2004, putting AGs forward P/E at just over 10x. With a little help from Europe, and a continued pickup in the Americas, we think $1.70 EPS will prove to be an overly conservative estimate. By our estimates, we think AG could earn at least $2-$2.25 next year, putting its P/E at 8-9x. Thats far too low for a strong company like AG at the early stages of a sustained turnaround cycle.

With a little luck, we think AG could prove to be a $22-$25 stock over the next year, earning us a 22% to 39% return with a very favorable risk/reward balance. Thats a trade well make everyday for the Tiger Woods portfolio.

About Bill Martin and Matt Ragas of Find Profit

Bill Martin founded Raging Bull, a financial community that helped pioneer the online investor revolution. He is editor of eFinance Insider and a director of , a publicly-traded online banking marketplace. Bill has appeared on CNBC, Oprah, Fox News, and 48 Hours and has been featured in New York magazine and The Wall Street Journal. He has been a guest speaker at MIT and Harvard.

Matt Ragas is the author of two critically-acclaimed business books, The Power of Cult Branding and Lessons from the eFront, both published by Random House. Previously, he was the founding editor of Raging Bull were he penned the widely read Cyberstock Investor Report. He

For the resources you need to Profit from the Pros, visit .

5

has been quoted or mentioned in publications such as Business Week, CBS MarketWatch, Publishers Weekly, Retailing Today, and Red Herring.

Together they produce the Find Profit newsletter. From August 1, 2002 to October 15, 2003, their Babe Ruth (High risk, High return) portfolio has delivered gains of +91.8%. Their Tiger Woods (Long-term growth) portfolio has played a winning +31.8 gain while their Special Opportunity portfolio grew +65.8. For comparison, the Dow returned only +9.8% in that time, the S&P 500 grew +13.4%, and the Nasdaq advanced +42.5.

Learn more about Find Profit and how you can try it free for 30 days and get more winning stock picks like this. Plus, get immediate access to current issues and special reports. Click here now.

UST, Inc. (UST)

Recommended by Kelley Wright of Investment Quality Trends

U.S. Tobacco can date its tobacco origins back to the early 1800s. Since at least 1964, the U.S. Government began warning about adverse health effects that stem from tobacco usage. The ensuing years have been a turbulent mixture of blame and lawsuit, from which UST has not yet completely emerged. Current products include smokeless tobacco, wine, and cigars.

Smokeless tobacco is USTs largest business. Run through its subsidiary U.S. Smokeless Tobacco, USTs brand Copenhagen has been in continuous production since 1822 and represents one of the oldest trademarks still existence in the United States. UST also began marketing its Skoal rand in 1934. Other moist smokeless tobacco products are marketed under the names Red Seal, and Rooster. Dry smokeless tobacco products are also sold under the Red Seal label, as well as CC, and Bruton. Although UST does not believe tobacco is safe, the company cites independent studies concluding consumption of non-combustible tobacco is of the order of 10-1,000 times less hazardous than smoking, depending on the product. With at least half of all smokers surveyed looking for an alternative, UST smokeless tobacco products have significant potential for growth for those smokers unwilling or unable to give up tobacco completely.

Anecdotally, UST is a highly visible sponsor of NASCAR, which is arguably the fastest growing spectator sport in the US. While tobacco may remain politically incorrect in many social circles, this fast growing demographic may prove that smokeless tobacco is an acceptable alternative to lighting up.

For the resources you need to Profit from the Pros, visit .

6

USTs premium wine business ranks among the top six in the nation. Through its International Wine & Spirits subsidiary, UST operates Stimson Lanes Vineyards & Estates. With production operations in California & Washington, Stimson produces over 30 million bottles annually. Premium wines are sold under the labels of Villa Mt. Eden and Conn Creek. Varietal table wines are sold under the names Chateau Ste. Michelle and Columbia Crest. Sparkling Wine (We dare not use the Ch-word) is sold under the name Domaine Ste. Michelle. Grape supply comes from USTs own vineyards with supplemental tonnage coming from independent growers in Washington and California. Premium Cigar products constitute USTs last major area of production. Though UST holds a minor stake in the overall smoking tobacco economy, its premium products are marketed to a niche market of consumers. Current brands include Don Tom?s, Astral, and Helix. Tobacco used in production comes from a variety of domestic and foreign sources.

Results from the second quarter showed net sales increases for smokeless tobacco and cigars. Wine net sales decreased by nearly 12% from the same period in 2002. Overall, net profit for the first six months of 2003 showed a slight decrease of 0.8%, caused primarily by declines in the Wine segment. Wine results have been hurt by price competition resulting from an oversupply of grapes. UST wines also faced increasing competition from cheaper imported brands. Accordingly, without an increase in volume trends for smokeless tobacco to supplement wine decreases, UST has revised its EPS target to $2.97 to $3.01 per share.

Interesting Qualities To Note: 1. UST has worked with many of the same farming families for over 70 years. 2. Over $2.8 billion has been spent on research for disease-resistant tobacco plants. 3. UST has approximately 4,911 employees. 4. Recent market capitalization was $5.73 billion. 5. Telephone # is: (203) 661-1100; Internet:

As a company that deals in tobacco and alcohol, UST is susceptible to a number of unpredictable litigation issues. This factor should not be neglected by readers looking for safety. This being said, the companys reaffirmed earnings outlook should bring USTs dividend out of danger. Increasing tobacco sales are encouraging, and may help to absorb continued difficulty in the wine segment.

Trailing twelve months were killed by the wine business due to the over production of grapes and the resulting over supply of wine. 2003 earnings are expected to come in @ $2.93 a share and $3.11 for 2004.

While nothing concrete has been established, many analysts think UST will exit the wine business and focus strictly on their dominant tobacco businesses.

At a recent price of $34, UST is Undervalued with a 2% downside risk to a low price of $33 and high yield of 6.0%. From current levels UST has a 96% upside potential to an Overvalue price of $67. UST also maintains an excellent dividend yield of approximately 6.25%, which has been paid since 1912. In addition to the long-term dividend, UST carries an A- rating from S&P and a beta of .42 with a G for consistent growth.

About Kelley Wright of Investment Quality Trends

Its not everyday someone is picked to succeed a legend. Chosen personally by the famed Geraldine Weiss herself, the new Managing Editor of Investment Quality Trends is Kelley Wright,

For the resources you need to Profit from the Pros, visit .

7

the man entrusted with the 38-year legacy created by Ms. Weiss and which has made Investment Quality Trends the source for enlightened investing in high-quality dividend paying stocks. He continues the winning tradition that has earned Investment Quality Trends the accolade of being named by the Hulbert Financial Service as the #1 newsletter on a risk-adjusted basis for the past 15 years.

Learn more about Find Profit and how you can try it free for 30 days and get more winning stock picks like this. Plus, get immediate access to current issues and special reports. Click here now.

KOS Pharmaceuticals, Inc. (KOSP)

Recommended by Jim Oberweis of The Oberweis Report

KOS Pharmaceuticals Inc. (Nasdaq KOSP) is a specialty pharmaceutical company focused on the development of proprietary prescription products for the treatment of chronic cardiovascular and respiratory diseases. KOS introduced the first FDA approved once-daily form of niacin in Niaspan, and has brought to market Advicor, the first and only dual component therapy approved by the FDA for treating multiple lipid disorders. In addition, the company continues to break ground in other critical areas such as advanced respiratory research and gastric retention drug-delivery systems. KOS was founded in 1988 and has been growing by leaps and bounds ever since, doubling their sales force in 2002 alone to 450 and turning profitable in the fourth quarter of 02.

KOS reported their most recent quarterly numbers on October 28th for their fiscal third quarter ended Sept. 30, 2003. Revenue increased 62% to $73.5, from $45.5 in the third quarter of 2002. They posted EPS of $.37 in the most recent quarter vs. a loss last year and well ahead of the estimate of $.31. Analysts were again asleep at the wheel, as this was the 6th straight quarter that the company has beaten estimates by a huge margin. Growth in the quarter was primarily attributable to increased sales of its cholesterol disorder drugs Niaspan and Advicor. Ironically, KOS benefited from rising consumer awareness of cholesterol disorders following big marketing campaigns from the big boys, AstraZeneca, Pfizer, and Merck, which are pushing competing products Crestor, Lipitor, and Zocor, respectively. KOS did not spend much on marketing, but the lower price point on their products has helped to fuel sales. Earnings per share estimates for the current year are at $1.46, $1.88 for 2004, and $3.60 for 2005.

Using the consensus estimate for 2004 as an example, and yesterdays closing share price of $44.95, we can see that the stock trades at a P/E of approximately 31. Although on an absolute

For the resources you need to Profit from the Pros, visit .

8

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download