Two Stocks to Cure the Bernanke Blues

Hi-Tech's subsidiary -- Health Care Products -- markets over-the-counter products primarily for diabetics. The Health Care Products division, led by Zostrix, a pain reliever for arthritis, and Diabetic Tussin, a top-selling sugar-free cough-and-cold remedy, performed well in the first half of fiscal 2006, showing 28% year-over-year revenue growth in the second quarter ended October 2006. Demographics also seem to favor generic drug providers like Hi-Tech as the population ages and Democrats push for lower health care costs.

Given the company's market cap of about $125 million and a strong balance sheet with more than $38 million in cash and marketable securities, I am a buyer of Hi-Tech's shares at today's prices. Analysts expect the company to resume growth in 2008, with revenue increasing 27% to almost $90 million and profit of 70 cents a share.

If we ignore the cash and securities, the company is trading at close to 1 times revenue and 10 times forward earnings. Granted, only two analysts cover the company, so we need to be cautious, but you are certainly paying a discount to the group. If we look at larger generic companies -- like Teva Pharmaceutical(TEVA Quote) or Mylan Labs (MYL Quote) -- the average price-to-sales multiple is closer to 3.5 and price-to-earnings closer to 15 times. These companies are growing in the single digits, not the 20% clip analysts believe Hi-Tech is on track for in 2008. If Hi-Tech is back on track, risk is fairly low at this share price, and the stock could easily see the high teens in 12 months.

The Aberrant Retailer

Bed, Bath and Beyond is a momentum darling with little momentum left. The stock looks like a great short, especially because its share price is now around $41. I don't care that the company is extremely well managed; it is. The fact is this company is expensive and leveraged to an industry that could be in for some hard times.