Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.
Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) is the favorite speculative play for 2007 from John Stewart, editor of The Leverage Alert. He explains, "The stock has made a strong positive move off its July lows, and the fundamental, technical, and sentiment outlook for the stock appear to suggest that the shares could continue to perform extremely well into 2007.
"From a fundamental perspective, the company is slated to earn a profit in the current quarter after several quarters of net losses. This development has not been overlooked by investors as the shares are up more than 40% from their July lows.
"What's more, Martha Stewart Omnimedia now trades well above its key short-term moving averages and has broken above former resistance around the 20 level on the monthly chart. This level now appears to be acting as support, which is an important bullish characteristic from a technical perspective.
"From a sentiment perspective, MSO is viewed negatively despite its positive fundamental and technical outlook. This is exactly the type of bullish situation I like to see from a contrarian perspective. Options players are quite heavily skewed toward the bearish side of the spectrum.
"Numerous traders are betting against the equity by shorting its shares. MSO's short-interest stands at more than 40% of the stock's float. As the shares move higher, the shorts may be forced to buy back their positions in order to limit losses. MSO's solid performance in the face of pessimistic sentiment suggests that the stock could continue to move higher as some of the sideline money is drawn into the investing game."
To see John's top conservative investment for 2007, click here.
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