Barron’s Stock Breakdown: Cisco, American Express, Linkedin, Wynn Resorts, BofA
Cisco (NASDAQ:CSCO): Cisco’s Q2 benefited from what the Street calls “easy comps.” However, diminished expectations could ultimately work in Cisco’s (NASDAQ:CSCO) favor this year, Barron’s contends. People are again looking at that 5%-7% growth rate and wondering whether it is as enticing an investment as, say, Apple (NASDAQ:AAPL), which has a similarly cheap valuation but has been recording revenue growth in excess of 70%. Barron’s Technology Trader Tiernan Ray is holding out hope that by stealing market share, selling revamped products and operating more efficiently, Cisco can still surpass investors’ low expectations as this year unfolds. Also, an increse in Cisco’s dividend, currently yielding 1.6%, would spice things up.
American Express (NYSE:AXP): Ken Chenault has led American Express with a steady hand for 11 years. Most are impressed with his willingness to take on the status quo and bring about change. While American Express’ success has kept its boss out of the headlines, not to mention Congress’ crosshairs, Chenault’s quiet competence, creative thinking and unwavering focus on integrity have impressed other corporate chiefs, Barron’s reports. These include Warren Buffett, whose Berkshire Hathaway (NYSE:BRKA) owns 13% of AmEx. Also, Lou Gerstner, who hired Chenault in 1981 and later went on to run RJR Nabisco and IBM (NYSE:IBM), is another fan.
Linkedin (NYSE:LNKD): LinkedIn’s business looks healthy, with Q4 blowing past consensus expectations and guidance raised. Excitement over social networking has certainly helped boost LinkedIn stock price. However, Barron’s contends that to maximize rewards, realize profits, and limit risk, shareholders can consider selling their stock into the sharp post-earnings rally, and replacing the position with a bullish call option.
Wynn Resorts (NASDAQ:WYNN): Caesars (CZR) is one of the largest gambling companies in the States with 52 casinos in 12 states and 7 coutnries. However, what it lacks is a casino in the lucrative gambling mecca of Macau, where Wynn Resorts (NASDAQ:WYNN) and Las Vegas Sands (NYSE:LVS) have valuable franchises, Barron’s says. After being taken private in a top-of-the-market leveraged buyout in 2008, Caesars carries enormous debt and has been burning cash. The shares are likely to remain volatile until there is greater float. Barron’s sees better domestic gambling plays such as Ameristar Casinos (NASDAQ:ASCA) and Pinnacle Entertainment (NYSE:PNK), which don’t have the enormous debt of Caesars and carry much lower valuations.
Bank of America (NYSE:BAC): Last week’s $25B settlement between the five major mortgage lenders and federal officials along with state attorneys general removes some some portion of the legal risks that have dogged the bank stocks for years. Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC) and Ally Financial agreed to terms on violations such as the use of “robo-signing” and failures to offer non-foreclosed alternatives. Barron’s “The Trader” column points out that these banks are in much better shape compared with the solvency issues of 2008-2009 and the continuing problems at European banks. JPMorgan (NYSE:JPM), operating with excess capital, trades at a price-to-book value of about 0.8x, and 1.1x tangible book. After passing regulatory hurdles in March some contend that the bank will be allowed to increase stock repurchases significantly and up its dividend. Bank of America and Citigroup remain the more speculative stocks of the big commercial banks, but should the bank rally continue, Barron’s believes they’ll undoubtedly do better.
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