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.
Vahan Janjigian, editor of The Forbes Growth Investor, chose Sirenza Microdevices (NASDAQ: SMDI) as his top pick. Although the stock rose 35% as of June 1, 2007, the issue no longer meets the requirements of his quantitative model and has thus been dropped from his coverage.
His new top stock pick for the rest of 2007 is AT&T (NYSE: T). The advisor explains, "As measured by revenue, AT&T is the world's largest telecommunications company. It provides both wireline and wireless phone and data communications services.
"The company realized cost savings of $300 million in Q1 from the BellSouth acquisition. The November 2005 acquisition of SBC Communications yielded an additional $600 million in savings in Q1.
"Better-than-expected synergies have led management to increase the 2007 operating profit margin target to 23-24%. The Wireless segment added 1.2 million net new subscribers in Q1, bringing the total to 62.2 million. Average monthly revenue per user increased 1.4% year-over- year to $49.21 per month.
"Total churn improved to 1.7%, down from 1.9% in the prior year period and 1.8% in Q4. Churn for postpaid customers hit a record low of 1.3%. These improvements helped the Wireless segment expand its operating profit margin to 38.9%.
"Deterioration in Wireline revenue is slowing thanks to strong growth in the regional business, improvements in enterprise, and accelerating net additions in broadband and video. The company garnered 691,000 net new broadband customers in Q1, bringing the total to 12.9 million.
"It also added 187,000 video connection customers, bringing that total to 1.7 million. Q1 net revenue jumped 83.9% year-over-year to $29 billion, largely due to the addition of BellSouth, but pro forma revenue grew just 1.7%.
"Pro forma net income jumped to $4.1 billion, or 65 cents per share, versus $2.0 billion, or 52 cents per share, in the prior year period. GAAP net income was $2.8 billion, or 45 cents per share, compared to $1.4 billion or 37 cents per share in the prior year period.
"Investment risks include competition from substitute technologies offered by internet phone companies and cable television operators. And as the market becomes saturated, it becomes increasingly difficult to add new subscribers and reduce churn without sacrificing margins.
"Yet new services such as internet protocol television, high-speed broadband, and VoIP services should offset these concerns. And an exclusive deal to sell Apple's iPhone is a big win."
See all 20 stocks the advisors picked for the second half of 2007.
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