Top Picks for 2010: Level 3 Communications (LVLT)

Inger explains, "We owned this stock years ago and when Level 3 bought Broadwing we got stock and cash; thus solid profits years ago or zero-cost basis on Level 3 shares.

"After pundits hyped it (at triple current prices) the stock has dropped to an area of attractiveness.

"One caution: from sub-$1 levels during our forecast market panic a year ago, the shares have doubled; thus it's not impossible that 'capital gains taking' could suppress the stock somewhat early-on in the new year.

"Thus our buy-zone will be particularly wide; such as between 90 cents and $1.30 or so. One may elect to pay more and scale-in; though we'd prefer to buy in on pullbacks.

"Meanwhile, we note that their ability to service their debt should not be an issue presently; so we are interested to see what they do over the next year or two; not past 2012.

"Our original interest in Broadwing -- now absorbed by Level 3 -- was the all-digital-optical as well as transcontinental (now to Europe as well) fiber system.

"This system has no latency as still is common with satellite and many other systems (including most fiber networks).

"On top of that mobile carriers are increasingly looking to 'backhaul alternatives' to meet their increasing bandwidth needs, which should increasingly result in offloading to fiber backhaul systems.

"The low latency is a reason why most sports and news networks are using Level 3 (two-way conversation reveals latency, whereas one-way conventional transmission doesn't) for their HDTV broadcasts, and we believe that will increase in importance as 3D arrives eventually.

"Additional pluses in the fullness of time include bandwidth requirements in the cloud computing area; digitized medical record keeping; military uses (they have certain key federal accounts) and certainly the growth of telecommunications in-lieu of physical travel.

"In the sense that reduced physical, and increased optical transport, is efficient, that's actually a bit of a 'green' story as well."

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