Hager Adds Two E-Leaders

09/05/2003 12:00 am EST


Fred Hager

President, Fredhager.com

Since inception in 1986, the average combined annual return of the stock portfolios compiled by Fred Hager has been 31.5% per year. In January, we asked Fred for his favorite stock for 2003. His answer was Rambus, which nearly tripled in subsequent months. Here are the latest two new additions to his portfolio.

Today, Hager says, "I have sold some of my holdings in Rambus (RMBS NASDAQ), simply as a move to diversify my holdings, and balance the portfolios a little more. It has nothing to do with my outlook for the company, which is still my biggest holding. As Rambus moved higher it became an increasingly bigger percentage of my portfolios. We have found two excellent companies to add as new holdings to our portfolios. Ebay (EBAY NASDAQ) is one of the best long-term companies on the market today. And eResearch (ERES NASDAQ) is a company with tremendous potential and impressive technology."

Rick Currin, research analyst at Hager.com , explains: "eResearch focuses on outsourced Cardiac Safety Services and digital data capture. The FDA in 2001 and 2002 put forth guidance stating that compounds that enter the blood should have cardiac safety testing across all therapeutic areas and that third party central core lab should be used. That, in a nutshell, is eResearch, which has about 50% market share already.  Fiscal 2002 revenues were up nearly 50% from 2001 levels and in the first quarter of 2003 revenues were up over 60% over first quarter 2002. The company has raised full year earnings guidance to $0.48, suggesting earnings growth in the 78% range. eResearch has very little debt, an experienced management team, rapidly growing revenue and earnings, a solid roster of blue chip customers, and a potentially exploding market with significant barriers to entry. I like the mix and am very excited that this company is in the early stages of rapid growth. I consider a three-year price target of $150 a reasonably attainable number.

"The second addition to our technology portfolio is eBay, which has taken Internet commerce and turned it into a great business and superior business model. eBay is a cultural phenomenon that has expanded wildly. What makes eBay such a king of commerce? Quite simply, the buyers know the sellers are there and the sellers know the buyers are there. eBay has become a sort of mega-marketplace, mega-mall, mega-car dealer, mega-super store, mega-exchange--all rolled up into one. As the market facilitator they collect a fee for transactions. At current growth rates eBay could see sales of $4.5 billion by 2005. Based on current margins, that translates to earnings of about $3.25 a share by the end of 2005. At a P/E multiple that is 25% below the current multiple, the stock could approach $180 a share based on 2005 estimates."

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