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Petrobras: Bursting with Energy


With the stock of Petr?leo Brasileiro, commonly called Petrobras (PBR), having soared from 43 in March to 93.18 on Nov. 7, is the party over? Don't bet on it, advises David Riedel, president of Riedel Research Group, who just visited the oil company in Rio de Janeiro and came back impressed. "It isn't just a play on oil or ethanol, but in the boom in Brazil," so the stock is still undervalued, he says. Riedel expects Petrobras, which found light oil off Brazil's coast in September, to come out with another oil discovery in 2008. Petrobras is the "best emerging-market investment, better than China or India," says Riedel, who predicts the Big Board-listed stock will hit 120 in 12 months. As the world's 14th-largest oil producer, Petrobras supplies crude to refineries in Brazil and other countries. It is also a major source of sugarcane-based ethanol, since Brazil is the world's largest cane grower. Riedel sees 2007 profits of $13.87 per American depositary receipt on sales of $88 billion, and for 2008, $17.79 on $103 billion. Donald Gimbel of Carret Investment Counselors, whose clients own shares, says Petrobras' vast reserves and strong market position will benefit from a booming Brazil. The company's growth rate, cash flow, profitability, and financial health are very strong compared with its peers in the U.S. , Europe, and other nations, says Gimbel.

Note: 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.

Trash is something most people throw away. But for Casella Waste Systems (CWST), it's a resource to be mined for profit. Companies such as Casella are set to become big winners in the growing environmental cleanup industry, says Hilary Kramer, chief investment officer of GreenTech Research, which owns shares. Casella is "an exciting" waste- management play because of its added value as a potential buyout target for larger companies, she adds. Casella, which provides waste- collection and -recycling services to residential and commercial customers, has jumped from 9 in April to 15.21 on Nov. 7. But it remains undervalued, says Eric Prouty of Canaccord Adams (CCI), who rates it a buy, given its assets. Bill Fisher of Raymond James Financial (RJF) has upgraded Casella to a strong buy, with a target of 22.

Note: 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.

Genaera (GENR) may be one of the most ignored biotechs around. AstraZeneca (AZN) is its partner on a drug for asthma that's in phase II trials, but Genaera's stock has slid to 2.20, down from 3.78 in April. "We can't understand why," says CEO Jack Armstrong, who owns 21%. Genaera is also developing a drug for obesity and diabetes. Early data from its phase I trials showed it "achieved its primary goal of establishing safety and tolerability," says Rahul Jasuja of MDB Capital Group, who rates the stock a buy with a 12-month target of 4. The drug is "an attractive therapeutic target for obesity and type-2 diabetes as it controls appetite and insulin levels," he says. Elemer Piros of Rodman & Renshaw (RODM), who rates Genaera outperform, with a higher target of 8, says its asthma drug will vie with Genentech's (DNA) Xolair, whose 2006 sales hit $425 million.

Note: 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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