Philips knows its light tech investments will pay off

Of PHG's three business lines (health care, consumer electronics, lighting), lighting appears to be the most promising, from a 3-5 year revenue growth standpoint, due to intense global competition in consumer electronics, and uncertainty regarding the pool of health care dollars, particularly in the United States.

Further, although Philips' lighting division registered a roughly 20% year-over-year decline in Q2, dragged lower by a weak construction sector in North America, that sector most likely has bottomed, which points to firmer revenue in the quarters ahead. That fact, combined with PHG's presence in the energy-saving fluorescent bulb technology segment, represent key value adders that investors who can tolerate moderate risk should not pass up. The First Call FY2009/FY2010 EPS estimates for PHG are 5 cents to $1.13.

Technically, PHG's stock chart has displayed a healthy uptrend, with constructive minor pull-backs, with only brief breaches of the pivotal 50-day moving average.

Stock Analysis: Koninklijke Philips Electronics is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in PHG now; then buy another 25% in three months, if European and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your PHG position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $7.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.