Matthew Kerkhoff, options expert and editor of Dow Theory Letters, continues his 14-part educational...
01/12/2007 12:00 am EST
In the latest edition of his newsletter, veteran financial advisor John Dessauer picks his top ten investments for 2007. Here is a brief look at three of his favorite hand-picked companies for the coming year...
"Regions Financial (RF NYSE) completed the acquisition of AmSouth, adding diversity and increasing its presence in Florida. Regions operates in 15 states, including Texas, the Carolinas, and Florida. Morgan Keegan, a respected New York Stock Exchange firm, is a division of Regions. Results in the last two quarters of last year were much better than expected. For 2006, Regions is expected to earn $2.93 a share, rising to $3.07 this year. The $1.40 annual dividend currently yields more than 3.7%. Regions is a well-managed regional bank. The stock has done well but also is being held back by concerns about merger integration and the mortgage market. At less than 13 times last year's results, Regions is undervalued. I expect to see Regions trade at 15 times 2007 results, or $46 before year-end for a total return close to 30%.
"AFLAC (AFL NYSE) is trading under 14 times this year's earnings guidance, below its historic norm of 16. Management is increasing the stock buyback program by 20%, to 12 million shares in 2007, and the dividend is up 42% this year. Both moves are shareholder-friendly ways to demonstrate the company's strong financial position. Economic growth is picking up in Japan. That will boost sales and lead to higher interest rates, delivering a greater return on AFLAC's Japanese investments. In early 2008, AFLAC and others will be able to sell their insurance products in Japanese banks. Estimates for this year are $3.30 a share. I see AFLAC at $55 in 12 months.
"Nokia (NOK NYSE) is a controversial stock, with opinions ranging from sell to buy. But Wall Street agrees that Nokia is doing well, has regained some lost market share in North America, and is trading at an attractive price. Earnings for this year are estimated at 1.2 euros or $1.57. The stock trades at 13 times this estimate. The long-run average is 18 times. Wall Street valuation models (using cash flow, sales, and profits) indicate a stock value of $30 to $35 this year, but analysts remain cautious, due to concerns about competition, average selling prices and a proposed joint venture (currently on hold) with Siemens in the networking business. Nokia's business in emerging markets is booming. The company has demonstrated that it can win back market share in tough markets. There is a super strong balance sheet. Take advantage of Wall Street's overblown worries and buy Nokia."