McAfee: Upgraded to Buy

I first recommended McAfee on July 5, 2009, at a price of $40.82. Look for McAfee's revenue to increase 10% to 15% in 2010, as the slow recovery in IT spending continues.

To-date, McAfee's operations have been less affected by the 2007-2009 cut back in IT spending, due to the mission-critical nature of security software. The company also has ample room to increase market share in key markets. The First Call FY2009/FY2010 EPS estimates for MFE are $2.42 to $2.69. That $2.69 FY2010 EPS estimate will likely prove to be low.

2010 Outlook: McAfee is a long-term play, but if you're looking to sell MFE within the year, take your profits after it rises to $44 to $45, if it fails to rise above $46.

Stock Analysis: McAfee is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in MFE now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your MFE position before April 2010. Sell/stop loss if you were to buy shares in this company: $34.

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