TO THE THREAD:
NVESTMENT PROS PICK TOP STOCKS
Jan-14-1998 5:31 AM, The Arizona Republic, DAWN GILBERTSON, The Arizona Republ
It's time for the pros' picks, and I don't mean Green Bay over San Francisco.
Each January, Taking Stock asks investment professionals who follow Arizona companies to pick a few
stocks they think will shine this year.
Their track record is pretty good, though there have been a few bad calls. Last year it was Employee Solutions
Inc., a Phoenix staff leasing and benefits company.
The stock, which soared in 1995 and 1996, came crashing down last year on poor earnings and concerns about
reserves for workers' comp claims. It was one of the biggest losers of the year, down 79 percent to $4.31.
Before the recommendations, a few words of caution. This is meant to give you some ideas to research, not a
list of buy orders to fax to your broker. Also, you're on your own. The pros aren't going to call when they
decide to sell.
Finally, a key theme this year is technology stocks, which were beaten down in the market tumble last fall and
are still struggling, so hang on.
Sermon over. On to the picks. (Look for ticker symbols and historical data in the Arizona Stock Report on Page
D2.)
-- Stephen Barnes, chartered financial analyst with Barnes Investment Advisory and publisher of the monthly
Arizona Stock Analysis newsletter. 1996 picks: Three-Five Systems Inc. (+28 percent) and WavePhore Inc. (+36
percent).
Three-Five Systems: Barnes is repeating with this one because it's nearly 10 points off the high of nearly $27 it
hit in October "and if anything, the outlook for 1998 is slightly better" than it was a year ago. The Tempe
company makes displays for cellular phones and other electronics and has announced new orders. Three-Five
closed Friday at $17.75. Target price: $31.
OrthoLogic Corp.: Barnes says the Phoenix orthopedic products company, a high-flier a couple years ago, still
has sales problems to work through but at just under $6, "the stock's too cheap." The company is under new
management and the new CEO and others have been buying shares, he notes. Target price: $12.
-- Michael Dwyer, managing director of investments for the Phoenix office of Minneapolis-based brokerage firm
Piper Jaffray. 1996 picks: Employee Solutions (-79 percent) and Cerprobe Corp. (+21 percent).
Action Performance Cos. Inc.: Despite Employee Solutions' stunning crash early last year, Dwyer's going for
another stock coming off a spectacular run. The stock has quintupled in the past two years. Dwyer's no
newcomer to Action, having picked the Nascar merchandiser in 1996.
He still likes the company a lot because stock-car racing continues to draw new fans, defying critics who say
it's a fad. Action started out in race-car collectibles but has branched out to other areas of the sport, including
concessions and licensing agreements with drivers. SmartMoney magazine likes the stock, too, picking it as
one of its 10 best stocks for 1998.
Action closed Friday at $36.25. Target: $50.
Insight Enterprises Inc.: The Tempe-based mail-order discount computer and software company, which targets
businesses, is a national player poised to continue its growth, Dwyer says. He likes its investments in its
Internet site and internal computer systems.
At $34.88, the stock is about 10 points off its November high. Target: $54.
-- Debra Fiakas, chartered financial analyst with HD Brous & Co.'s Phoenix office. Last year's picks: Action
Performance (+110 percent), Simula (+13 percent).
Fiakas combed the list of battered stocks for this year's picks, zeroing in on those with little or no debt and
strong balance sheets. She notes, however, that she has not published research reports on either of the
following companies and declined to set a target price.
Microtest Inc.: At $4.63, the Phoenix-based maker of computer network testing equipment is trading just above
book value, making it a great buy, she says. She sees sustainable demand for the company's products. Another
plus is that insiders have been buying the stock. She adds, however, that the company has disappointed Wall
Street and thus has "some proving to do in the marketplace."
SpeedFam International Inc.: The Chandler semiconductor equipment manufacturer has many of the same
characteristics as Microtest, Fiakas says. The stock has lost more than half its value since it topped $60 in
October and is being dragged down with the rest of the industry, she says.
-- Marc Robins, chartered financial analyst and editor of The Red Chip Review, a small-stock research guide
based in Portland, Ore. 1996 picks: National Health Enhancement Systems Inc. (+56 percent) and Simula Inc.
(+13 percent)
Simula Inc.: Even though the Phoenix maker of airline seats and side-impact air bags disappointed investors last
year with production problems that resulted in a big loss, Robins is hanging on. He still sees huge potential for
the company's crashworthy products.
"They are managing their business much tighter to drive profits, and I think you will start seeing that as soon
as the fourth quarter is released."
Simula closed Friday at $15.38. Target: mid-$20 range.
Zila Inc.: The Phoenix oral-health care company, best known for its Zilactin canker-sore treatment and OraTest
cancer-detection system, expanded its lineup last year with some acquisitions. Investors will have more to
focus on when and if the government approves OraTest, the oral-cancer screen Zila has long said will be a
home run for the company. Zila closed Friday at $6.97. Target: $10-$15. Dawn Gilbertson's Taking Stock in
Arizona column appears on Sunday. She may be reached at 444-8617 or via e-mail at
dawn.gilbertson@pni.com.
(Copyright 1998 Phoenix Newspapers, Inc.) |
