Dawn Alston Paige has a clear-cut philosophy for managing assets in uncertain times: go on the defensive. The co-founder of Durham, North Carolina-based Piedmont Investment Advisors, which manages $1 billion in assets, has developed a diverse portfolio of five stocks that promises performance yet poses little risk to investors. She favors large and small companies with solid earnings potential across a broad range of industries — stocks — she believes that should fare well in an unpredictable market.
Paige’s fist pick: Office Depot (NYSE: ODP), a leading seller of office products. The chain’s new CEO is Steve Odland, the former CEO of AutoZone, the largest retailer of auto parts and accessories. “We think he is responsible for turning that company around,” says Paige, who expects the same performance at Office Depot. “He’s employing a ‘good,’ ‘better,’ ‘best’ pricing strategy that’s going to bring ODP’s operating margins up to operating norms and then increase their operating margin points over the next two to three years.” With nearly $15 billion in sales, the company is trading at $39.54; Paige expects the remodeled stock to reach a target price of $50.
She also likes Amgen Inc. (NASDAQ: AMGN), the biotech giant with $12.4 billion in sales. Amgen’s medicines target cancer, blood disorders, and inflammatory diseases. Anti-anemia drugs account for nearly 30% of the company’s revenues. “This biotech has solid growth
across their pipeline of products,” she says. “And their anemia drug Aranesp appears to be gaining market share.” Paige expects a healthy rise over the next 12 to 18 months, from its current price of $71.22 to $85 a share.One of her riskier picks is St. Peters, Missouri-based MEMC Electronic Materials (NYSE: WFR). The $1.1 billion company — which has a current share price of $37.95 — supplies silicon wafers to many of the world’s leading semiconductor makers and offers considerable growth prospects and pricing power. “A segment of the business is the refining and sale of poly-silicon. There is a shortage of this particular component used in the cells of solar panels.
As alternative energy products gain share, this company and its products should continue to benefit.” Paige says solar panels, already in great demand in Europe, will come into greater demand in this country. She targets a price of $50.Another pick is Fannie Mae (NYSE: FNM), a financial company that serves the home mortgage industry in the U.S. Despite recent regulatory investigations, Fannie Mae has a current share price of $54.94. The company is now working to restate its earnings for 2002–2003. At the very least, Fannie Mae is expected to reinstate its dividend distribution to shareholders — a move that should bring in a new class of investors. With a “buy” rating and $70 price target, Paige says Fannie Mae “is a good contrarian play.”
She also favors Valero Energy Corp. (NYSE: VLO), the country’s largest independent oil refiner. This $80 billion company converts low-cost residual oil and heavy crude oil into cleaner-burning, higher-margin energy products. With 18 refineries producing 3.3 million barrels per day, Valero’s stock currently trades at $48.15. Paige predicts the price will hit $80 over the next 12 months. “Most new oil finds are sour crude, which Valero processes in a more efficient manner. That gives them a unique competitive edge.”
DAWN ALSTON PAIGE
Stock Picks
| Company Exchange: Symbol | Price* | 12- to 18-Month Price Target | P/E on Projected 2006 Earnings | Est. 5-Yr. Annual EPS Growth Rate | Why Stock Will Outperform |
| Office Depot (NYSE: ODP) | $39.54 | $50 |  40.2 | 1.0% | The new CEO has a successful history of revitalizing companies. |
| Amgen Inc. (Nasdaq: AMGN) | $7.22 | $85 | 29.6 | 2.29 | The company’s growth and market share are increasing impressively. |
| MEMC Electronic Materials (NYSE: WFR) | $37.95 | $50 | 18.1 | 1.70 | This tech supplier is expanding into the alternative energy industry, concentrating on solar energy |
| Fannie Mae (NYSE: FNM) | $54.94 | $70 | n/a | n/a | Investors will appreciate the financial services firm’s reinstated dividend. |
| Valero Energy Corp. (NYSE: VLO) | $48.15 | $80 | 7.0 | 7.8 | Valero is the leader in oil refining and they do it inexpensively– lower oil and gas prices are en route. |
* As of Sept. 25, 2006. Source: Dawn Alston Paige, Yahoo! Finance, Etrade.