Stocks & Markets December 4, 2009, 4:25PM EST

Picks of the Week: Apple, AIG, Lilly, BofA

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Dec. 1

Kaufman Bros. maintains buy; removes from Focus List

Kaufman Bros. analysts Aaron Kessler and Andrew Connor removed online travel company Priceline from the firm's Focus List as they expect the shares to consolidate recent gains in the near term after having increased 36% in November. The analysts tied the stock's recent gains to "upside to earnings and a strong 4Q outlook".

Kessler and Connor pointed out in a Dec. 1 client note that traffic data remains strong at Priceline and Booking.com. According to industry researcher Compete, Priceline.com traffic increased 42% in October, vs. 48%, year-over-year, in the third quarter, and 35% year-over-year in the second quarter. Also, their analysis of worldwide searches for "Booking.com" on Google indicated that searches have increased 182% year-over-year in the fourth quarter (through Nov. 28) vs. 176% in the third quarter and 147% in the second.

The analysts maintained a $240 price target on the shares.

American International Group Inc. (AIG)

Standard & Poor's Equity Research maintains hold; cuts price target

In a Dec. 1 note, S&P equity analyst Catherine Seifert said she sees concerns over the health of certain AIG insurance units being offset by the announcement that AIG closed its previously announced $25 billion debt exchange with the Federal Reserve Bank of New York as part of its plan to position two life insurance units for a possible sale or public offering.

Seifert said her hold opinion reflects her view that if AIG can retain 75% of its deferred acquisition cost value, tangible common equity per share would climb to $81.60 from a deficit of $162.06 a share at September 30. Her $35 price target, cut $10, assumes the shares trade at a discount to book value.

Nov. 30

Apple Inc. (AAPL)

Kaufman Bros. rates buy

Apple Inc. appears to have done well over the Thanksgiving weekend even without steep discounting and despite the release of Windows 7 -- a testament to the resilience of its products, Kaufman Bros. analyst Shaw Wu said on Nov. 30.

Wu said in-the-field checks revealed strong foot traffic at Apple stores even if Black Friday discounts were a "modest" 4% to 10% on a limited set of products. The blockbuster iPhone was not on sale.

Third-party retailers that sell Apple products were more promotional. Discounts at retailers including Best Buy (BBY), Amazon.com (AMZN), Wal-Mart (WMT), and Target (TGT) were as much as 20% compared to 11% to 13% in prior years. Some included gift cards of $50 to $150.

Apple's popularity also is remarkable given that its Mac computers sell at two to three times the price of PCs, he said. Apple has done well given competitive pressure from Windows users who are upgrading to Windows 7.

Wu said it looks like new iMacs and MacBooks are out of stock at certain retailers or in limited supply -- a good sign going into the holiday season. As such, Wu said his sales forecast of 2.9 million Macs in the quarter -- already higher than what other Apple analysts are expecting on average -- is "likely conservative."

He said the release of the Snow Leopard operating system, new iPods and desktop Macs and a potential new product is expected boost sales in coming quarters.

U.S. Bancorp (USB)

RW Baird upgrades to outperform from neutral; raises price target

U.S. Bancorp's stock price makes it an attractive buy for investors, RW Baird analyst David George said on Nov. 30 as he upgraded the shares to the firm's highest investment rating. George also boosted his stock price target by $4 to $29.

U.S. Bancorp shares have slipped 10% since mid-October.

"USB shares trade at what we view as a deserved premium to other banks on our estimates of normalized earnings," George wrote in a note to investors. "Despite this premium, the stock trades at a discount to peers on consensus 2011 EPS estimates, likely due to our view that USB will achieve normalized EPS faster than peers given the companys lower-risk loan book and high pre-provision returns on capital."

The Minneapolis bank is buying small banks, adding to its earnings potential, George said, and increasing its market share through the downturn. He also expects it to be among the first of the big regional banks to raise its dividend.