Scott Kays
President of
Kays Financial Advisory
Atlanta, GA
Waste Management: WM -They are the nation's largest trash disposal firm.
Here's what I like about the stock: it has a good dividend yield of almost 4%; its earnings are not very volatile and not very sensitive to the economy; and it still undervalued.(The stock is selling for between $28 and $29 a share, and we think it is worth a little over $40).
However, these qualities make it a relatively defensive stock. At this stage we are in this business cycle, I would rather be in more economically sensitive industrial stocks. Waste management's stock price has rebounded from its lows only about half as much as the market as a whole.
WM’s earnings are projected to grow only about 1% over the next year.
HOLD
Coca-Cola: KO -I could make many of the same comments about Coca-Cola as I made about Waste Management. The dividend yield is slightly over 3%; I like the company's penetration into emerging markets, specifically China and India; Coke has an incredible distribution network
Here's the rub: the industry in which Coke operates as a mature, relatively slow-growing industry, and the good news about the company is reflected in its current stock price. We think the stock is selling for close to fair value at almost $50 a share. The company's earnings are projected to grow less than 5% over the next 12 months and only 8% annually for the long-term. Again, this consumer staples stocks will not likely take full advantage of further increases in the stock market.
SELL
Wells Frago: WFC -The stock has a decent dividend yield of almost 3%. The big banks were priced at one point for Armageddon; that fear has passed and stock prices of banks have rebounded hard to reflect that. At this point I think banks will begin trading more on their fundamentals than on rebounding from desperate lows.
The company will benefit some from its takeover of Wachovia; however, I expect earnings to be hindered by slow mortgage activity and further credit losses.
The stock is up almost 250% since its lows.
The stock is slightly undervalued-it is selling for around $28 and we think it is worth closer to $33.
I would hold that stock now and wait for a better buying opportunity before committing new capital
HOLD
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