Report Card: Anne Malone

Anne Malone Salomon Smith Barney
	Report Card 3* Overall rank 3* Rank by institutions 19* Rank by stock picking Makes money for me Saves me from disaster Makes me think Tells the truth Meaningful service, not overkill Well-connected *Out of 26. Best star rating is 3 stars. Click here for our methodology.
3rd Place Health Care Equipment and Supplies

Bio

B.A., St. Leo College. Malone joined Salomon Smith Barney in June 1996, covering the medical-technology industry. Previously, she worked at Bear Stearns for seven years, the last three covering medical-technology stocks.

Industry Outlook and Style

The Winners

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"One of the nicest analysts I have ever met." That is how one voter in TheStreet.com's Analyst Rankings -- Equity 2000 survey describes Malone. "Great response time to questions," says another fan, who wishes Malone had more coverage "because she does so well with the names she covers."

In March, Malone made a perfectly timed call on Johnson & Johnson (JNJ Quote - Cramer on JNJ - Stock Picks). Five days after the shares of the hospital-supply behemoth bottomed out at 67 1/4 (down from 105 in November 1999), Malone signaled a buy. She cited "overblown" concern about J&J's estimates and an "absurdly low" valuation. In 3 1/2 months, J&J hit 100; recently it has been trading in the mid-90s.

Malone got recognition for that call, but these days she is focusing on a different crop of picks. Malone is well aware that performance in this group has been a mixed bag. And she thinks it is likely to stay that way. "While, overall, I think the group can modestly outperform, we're going to have to look for particular names to do well, because some of these companies are already pretty generously valued and there aren't many top-line growth stories left," Malone notes.

Two names Malone singles out as being attractive: Baxter International (BAX Quote - Cramer on BAX - Stock Picks) and St. Jude Medical (STJ Quote - Cramer on STJ - Stock Picks). (Salomon Smith Barney does not have investment banking relationships with these companies.)

Baxter has been Malone's top pick since early January. She maintains that the company deserves a medtech multiple, rather than a hospital-supply multiple, because it is steering its revenue and earnings mix toward its high-growth, high-margin biosciences division. In March, she points out, Baxter spun off its low-growth, low-margin business focused on cardiovascular products. (The division is now called Edwards Lifesciences (EW Quote - Cramer on EW - Stock Picks).) "A year ago I would have thought of Baxter as a 12% grower of earnings," Malone says. "Now I think it's a 15% or so grower."

St. Jude, says Malone, should benefit from its entry by year-end into the dual-chamber, implantable cardiac-defibrillator market. "We should see a move from revenue growth of 3% to 5% back into the double digits, and this new product will be the primary reason for that boost," she says. In anticipation, St. Jude's stock has crept from 29 to the low 40s in the past couple of months and could "easily hit 50 within the next 12 months," projects Malone.

Stock Pick

Favorite stock for next 12 months:
Baxter International
Comment:
"Baxter is one of the few stories in this group that's coming together, though the valuation doesn't show it yet," Malone says. "Investors will get the best reward for the risk from this stock." She made Baxter her top pick, at SSB's annual "Top Picks" conference in January, when shares traded at 60 3/8. The stock currently trades in the high 70s, and Malone predicts it could approach 90 in the next nine to 12 months.


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Which stock do you like best? Weinstein and Malone: Baxter International Reicin: Abbott Labs