Barron's Digest December 11,2006 Issue

Douglas A. McIntyre


Mellon and Bank of New York have announced a merger and Barron’s had suggested that there needed to be an event to unlock Mellon value. The bank’s shares, currently at $42 could be trading at $50 by early 2008.

Deals to buy-out casinos are multiplying. Station Casinos is being bought for a 20% premium.Other casinos that could be bought are Pinnacle, Penn National Gaming, and Isle of Carpi.

Intuit is getting into the business of providing service to online banks by buying Digital Insight. It allows the company to get into the area of providing software for small business applications beyond finance Morgan Stanley sees the shares rising to $38 up from just over $30 now.

Medtronic is working on innovations for wireless telemetry which allows patients to be monitored everywhere they go. This would be on top of the company’s implantable defibrillator business. The company trades at a multiple similar to Boston Scientific and St. Jude Medical but has better cash flow. The stock is up to $53, but there are some investors that think it could go to the $60s as new products are released.

Wall St. has not liked telecom equipment company Nortel. But, the company has been cutting costs and building its core businesses. The shares have been flat for three years but could jump by over a third in the next year as the restructuring of the company takes hold.

Gatehouse Media is a newspaper company with rising shares and a large dividend. Its shares have been outperforming those of companies like Gannett, Journal Register, Lee, McClatchy and The Tribune. But, investors should be careful about being attracted by the large dividend. Based on earnings and cashflow, the stock has become expensive.

Wall St. is down on shares of Alcom because of short term concerns regarding its implantable lenses for cataract patients. As baby boomers reach their 60s, the company’s market should grow, and shares could rise from the current $113 to near $140.

Vodafone is improving its prospects by increasing its wireless assets in emerging countries like Turkey and South Africa.

Is Pfizer going to recover? They face the prospect of a number of their drug patents running out in 2011, but that gives them some time. But, the company has five drugs in late stage development and says that this number will double by 2009. The company also has the cash to raise its dividend.

EDS is a company in the new world economy that trades at old world multiples. The company recently bought into an Indian outsourcing company with 20,000 workers. Operating profits climbed from 2.5% last year to 4% of sales this year and should rise to 6.3% next year.

Disney has filed a patent for a streaming video device which is interesting due to its close ties with Apple. It appears that the two companies may be cooperating on the mobile video front. Consumers may soon be watching Disney video on Apple handsets.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.