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Q: How about Clorox (CLX )? A: Clorox is a consumer-staples stock that is one of our favorite picks. We are recommending that investors buy Clorox and look for the shares to be a top performer within the next 6 to 12 months.
Q: Any stocks that you've recently upgraded or downgraded? A: A stock that we upgraded to a buy opinion today is the class B shares of Viacom (VIA.B ). We look for this stock to benefit from an improved advertising environment in the months ahead. A stock that we recently downgraded is Coach (COH ), on which we lowered our opinion to hold from accumulate. In our view, a favorable outlook for the company is adequately reflected in the share price.
Q: Your perspective on Starbucks (SBUX )? A: We are telling people to sell shares of this food-service company. Starbucks recently agreed to acquire another business that should allow it to expand its retail presence. However, we see the stock selling at a lofty valuation and believe that the shares face significant near-term downside risk.
Q: Tom, is it too late to buy Procter & Gamble (PG )? A: We believe that Procter & Gamble is an attractive stock for investors to buy. It recently agreed to buy a major hair-care company, and we view this transaction as favorable. It should bolster PG's sales and fill gaps in its hair-care business.
Q: You mentioned as buys Viacom B stock and P&G -- what others do you have? A: Some of our other favorite stocks include share of cable system company Comcast (CMCSAand CMCSK ). We have a buy opinion on both types of stocks. We look for this company to successfully integrate a recent large acquisition and to benefit from the rollout of new digital or high-speed services.
Another favorite stock in the consumer discretionary area is Wendy's International (WEN ), which is a leading restaurant business. We believe the stock is attractively priced and look for it to significantly outperform the broader market in the next six to 12 months.
Q: Do you think Chico's FAS (CHS ) can sustain its growth? Do you follow it? A: Yes, we do follow Chico's. However, in our view, the company's strong earnings-growth prospects are adequately reflected in the current stock price.
Q: In the same industry, do you have a reading on Ruby Tuesday (RI )? A: We also have an accumulate opinion on shares of Ruby Tuesday. It recently reported earnings for its February quarter of 39 cents per share, which was in line with our estimate.
Q: What's your opinion of Ross Stores (ROST )? A: We like shares of Ross Stores. We're expecting the company to generate earnings per share of $2.86 in the fiscal year ending January, 2004, and we have an accumulate opinion on the stock.
Q: Thoughts on Rent-a-Center (RCII )? A: We also have an accumulate opinion on shares of Rent-a-Center. In 2003, we're looking for it to report earnings per share of $5.36.
Q: What about big retail chains, Tom, such as Sears (S ), and the major department stores? A: Among some of the larger retail companies, our favorite stock is Wal-Mart (WMT ), on which we have a buy opinion. I realize, however, that Wal-Mart is not a department-store stock. In our view, Wal-Mart is picking up market share from a number of department store companies, and that is one of the reasons we prefer shares of Wal-Mart to those of companies such as department-store companies Sears and Federated Department Stores (FD ).
Q: Thinking of shorting eBay (EBAY ) -- what are your thoughts? A: EBay is a consumer-discretionary stock on which we currently have a hold opinion. In our view, eBay has been one of the bigger success stories among newer companies that have pinned their businesses to the growth of the Internet. However, our current opinion on the shares is that the stock is adequately priced.
Q: Linens 'n Things (LIN ) has had some problems. What do you think of their prospects? A: Linens 'n Things and Bed Bath & Beyond (BBBY ) are two leading retailers of home accessories or furnishings. Among those two companies or stocks, we favor shares of Bed Bath & Beyond, on which we have an accumulate opinion. With Linens 'n Things, we are advising investors to hold the shares but are not recommending new purchases.
Q: Opinion on Lowe's Stores (LOW )? And while you're at it, LOW vs. Home Depot (HD )? A: In comparing the shares of those major home-improvement retailers, we prefer shares of Lowe's, on which we have an accumulate opinion. With Home Depot, we are advising investors to hold the stock but are not recommending new purchases.
Q: Circuit City (CC ) or Best Buy (BBY )? A: With Best Buy and Circuit City we have a hold opinion. We see Circuit City as being in more of a turnaround mode, but we have enough wariness about prospects for the year ahead to limit our bullishness on the stock. With Best Buy, we see the extent of the stock's expected earnings growth adequately reflected in the shares' current valuation.
Q: Tom, would you refresh us on S&P's buys in your coverage area? A: What I will do for you is list some of our favorite stocks in the consumer-discretionary area that we have not had a chance to touch upon yet. [Additional] stocks on which we have a buy opinion include AutoZone (AZO ), Federal Signal (FSS ), Gannett (GCI ), Lennar (LEN ), Newell Rubbermaid (NWL ), P.F. Chang's China Bistro (PFCB ), Quiksilver (ZQK ), SCP Pool (POOL ), and Staples (SPLS ). I can also mention for you some of our other sell recommendations, which include Children's Place Retail Stores (PLCE ), Eastman Kodak (EK ), Hilton Hotels (HLT ), and Visteon (VC ).
Copyright 2003, Bloomberg L.P.
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