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.
Mark Mowrey, editor of the Prudent Speculator TechValue Report, chose Cogent Inc. (NASDAQ: COGT), which rose 41% as of June 1, 2007. Although he maintains a $24 price target for those who own the stock, he no longer is recommending purchase.
For his new top idea, Mark looks at United Online Inc. (NASDAQ: UNTD). The advisor explains, "For as many reasons to be wary of the company, we find more to like about this net-centric company.
"Founded as Juno Online Services in May 1995, and formed via the merger of that company with fellow dial-up Internet services provider NetZero in June 2001, United Online is one of a select few surviving early Net access players.
"As UNTD milks the dial-up business for cash flow, management hopes to transition as many of those paying customers as they can to a new broadband offering. Still, revenue from the communications segment is declining at a rapid clip, falling 13 percent in 2006 to $375.9 million.
"So what is there to like about a company with declining revenue in its core business, the only savior for which is entry into an even more competitive space? The general answer is the provision of services folks utilize once they're already on the Net.
"Specific to United Online's operations, that means an evolving targeting of Net surfer affinities for social networking and money saving offers. In November 2004, UNTD purchased Classmates.com, a site where visitors could reconnect with former grade-school and university friends.
"The website also generates revenue from folks willing to pay to reconnect. Much as the far more coveted Facebook.com (ludicrous presumed multi-billion dollar valuations abound for the property), Classmates looks to morph into a social networking destination where visitors will be able to do more than just reconnect.
"While the service will make efforts to reunite easier via maps showing the locale of former school buddies, Classmates also will strive to make it far easier and more compelling for visitors to seek new friends via dating and other services.
"Online loyalty marketing site MyPoints.com, purchased in April of last year, also offers great promise, giving advertisers a more direct route to consumers interested in their wares, and giving consumers a way to purchase desired products at a discount. Both sites, part of the content and media segment, together generate a third of the overall total.
"Management's focus on transferring more than a decade of experience on the access side of the Net to advertising and service revenue models aside, what excites us most about the company is its valuation. Shares trade at 15 times expected 2007 earnings and at a price-to-book value ratio of only 2.2, very reasonable for an internet stock.
"The balance sheet is virtually debt-free with roughly $2.50 per share in cash. Further, the stock yields 5%, an aberration for a tech company. An ongoing share buyback program only adds to our enthusiasm. Of course, competition in this space is fierce, which is why it is so important to avoid paying a rich premium."
See all 20 stocks the advisors picked for the second half of 2007.
U.S. Justice Department turns an eye on the telecoms
Serious Money: Three stocks that beat the market
Closing Bell: The wishy-washy return to Q3 (AA, DDUP, EMC, DNDN, CVX, FSLR, GS)
