Beyond Earnings

Silas Myers says growth investing isn't all about chasing momentum

at $98,] we think the stock’s downside is $84, but believe that there is a very good chance that it’s worth is closer to $130 a share.

Financial stocks are a group you said caught your eye. Any names there?
Legg Mason (LM) is one company we like a lot. The main issue the market has with Legg Mason is the fact that its integration of the mutual fund and asset management business it received from an asset swap with Citigroup in 2006 is taking longer than Wall Street expected. Here’s the lynchpin: Stocks in the asset management group currently trade at an average share price of 3% of the assets they have under management. If Legg Mason [trading at $75] were to secure that sort of valuation, the stock would trade at $200 a share.

Are there any tech holdings that currently fit your criteria?
Maxim Integrated Products (MXIM) is a tech holding that we think offers very good upside. The company’s shares [trading at $26,] were hit by problems stemming from a Securities & Exchange Commission case brought against prior management over the backdating of options. Maxim has been working to clear that up and to settle the matter once and for all, and shares should get a boost from putting the matter to bed. The company makes analog and digital circuits for a variety of products such as cellular telephone, automobiles, and audio devices. Downside for the stock is approximately $20 a share, while we think the shares have an upside of $37.

Myers’ Picks

52-week Price Range
Company (Ticker) Price Low High 2009 Est. EPS 2009 P/E Ratio Comment
FedEx Corp. (FDX) $97.97 $91 $121 $7.44 13.2 Business in booming markets such as China and India should cushion any slowdown at home.
Legg Mason (LM) $75.07 $68 $110 $5.78 13.0 The firm’s shares are chronically undervalued despite the fact that bear markets are a boost to asset managers.
Maxim Integrated Products (OTC: MXIM) $25.65 $22 $35 $1.63 15.7 Caught up in a backdating scandal, this speculative tech play offers solid upside potential.

Data as of 12/12/07 Source: Yahoo Finance, Zacks

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