McAfee, computer security/anti-virus company extraordinaire, is not cheap at these price levels (P/E 20, stock price at/near $40), so it's not for the squeamish or low-risk investors.
Those improving fundamentals include: 1) a broader product portfolio; and 2) less account attrition, despite the recession, due to the mission-critical nature of security software. The First Call F2009/F2010 EPS estimates for MFE are $2.35 to $2.61.
Further, Fortune 1000 information technology spending is expected to decline 5-7% in FY2009: any smaller deficit will send McAfee's shares north – institutional investors have sensed this in the past six months and have bid-up shares. In sum, MFE is not cheap, but the revenue prospects and visibility warrants my Buy rating.
Stock Analysis: McAfee is a moderate-risk stock. Consider buying a 25% position in MFE now; then buy another 25% in four months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your MFE position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $17.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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