Savings Experiment: Snow Removal
The Money Man Behind Rick Santorum: Who Is Foster S. Friess?Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.
Dylan Jovine, editor of The Tycoon Report, chose RadioShack Corp. (NYSE: RSH) as his top pick. The stock had risen 100% as of June 1, 2007. The advisor recommends selling the shares.
His new recommendation for the second half of 2007 is United Healthcare Group (NYSE: UNH). The advisor asks, "How can you tell the difference between a buying opportunity and a 'value trap'? One way to do so is to separate the behavior of the stock price from the strength of the underlying business.
"For example, if a company has a strong underlying business that continues to grow (even as its stock price shrinks under the light of scandal), the inverse action of the stock going down while the business 'goes up' tends to lead to a buying opportunity.
"One great example of this is United Healthcare Group. Under the taint of the options back-dating scandal, last year Wall Street punished the stock by sending its shares down by nearly 30%, shaving off close to $20 billion in stock market value for a scandal that is expected to cost the company roughly $1.5 billion in restatements.
"Even better still, in the case of United Healthcare, you have a dominant, $78 billion (sales) company that is increasing revenue while at the same time lowering costs, thus increasing its ratio of profitability. When the scandal first hit, the stock was selling in the $70 range ... it's now selling in the low-$50 range.
"What's the difference? Having gotten rid of a bad CEO means that the business is now better than it was, as it is under better leadership. In addition, the company has reported double-digit sales and earnings growth. Most importantly though, the stock price is lower than it was before.
"Hmmm. Better business. Higher sales. Higher earnings. And a lower stock price? As somebody who hunts for and invests in fallen angel stocks for a living, I've learned that these are the types of opportunities that you have to jump on, because they're so rare."
See all 20 stocks the advisors picked for the second half of 2007.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
