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AT&T: Old Reliable Is Back


The pre-1982 Ma Bell was a "stock for widows and orphans," or to be more precise, an investment for "growth and income." The new AT&T (T) is a product of several mergers--a conglomeration of the old Ma Bell's long-distance operations; the Baby Bells (Ameritech, BellSouth with Cingular, and PacTel); and SBC Communications, which bought AT&T in 2005 and renamed itself AT&T. Now the largest U.S. telecom, AT&T bolstered its stake in the spicy wireless market when Apple (AAPL) picked it as the exclusive U.S. carrier for its iPhone. The iPhone "will enable AT&T to widen its share advantage over principal rival Verizon (VZ)," says Justin Hellman of Value Line, who thinks AT&T is a timely buy. "We like this high-quality stock for the long haul, too, and believe it offers above-average total return potential to 2010-12." AT&T has bounced up from 31 last November to 41.79 on Oct. 31, 2007. Greg Miller of Deutsche Bank (DB), which owns shares and has done business with AT&T, rates the stock a buy and upped his target price from 45 to 46. With five straight quarters of rising revenue, AT&T shows "it can generate earnings growth beyond mere cost cutting and synergy," says Miller. Its third-quarter profits jumped 41%, and revenues doubled, to $30.1 billion. Its dividend yield is 3.4%. Miller sees profits of $2.75 a share in 2007 and $3.27 in 2008.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Shares of little-known biotech Clinical Data (CLDA) have soared from 9.40 a year ago to 28 on Oct. 31. Why? It developed a possible blockbuster antidepressant along with a genetic test to predict its effectiveness in patients. But investors are also betting on Randal Kirk, Clinical's billionaire chairman, who controls 40% of the stock. He founded and in 1996 became chairman of New River Pharmaceuticals, acquired in 2007 by Shire. In 1983, Kirk co-founded General Injectables & Vaccines, bought by Henry Schein Inc. (HSIC) in 1998. Pequot Capital Management owns 3.5% of Clinical Data. "Some expect Kirk will end up selling Clinical," says Chystyna Bedrij of Griffin Securities, who rates it a buy, with a target of 40. Its chief drug is Vilazodone, an antidepressant that she says showed positive data in initial phase III trials.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

MoneyGram International (MGI), which provides global money transfers and bill-payment services, fell 11%, to 19, on Oct. 18 because of losses in mortgage-related investments. By Oct. 31 it had dropped further, to 15.95. MoneyGram traded as high as 30 in July. The huge slide has generated buzz that MoneyGram may be looking for a buyer. It has hired JPMorgan Chase (JPM) to review its payment systems business, whose third-quarter income tumbled 12%. John Bendall, CEO of Hermitage Capital, which owns shares, says MoneyGram could either spin off its payment systems unit or sell the whole company, which he figures is worth 30 a share. Zaineb Bokhari of Standard & Poor's rates MoneyGram a buy. Its core business is "solid," he says, and its stock "attractive." Bokhari sees earnings of $1.52 in 2007 and $1.80 in 2008.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.


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