Maybe it shouldn't come as any surprise that there aren't any stocks that usually carry the "value" moniker in
annual list of "10 Uncommon Values," released today.
Lehman's strategist, after all, is Jeffrey Applegate, one of the most bullish on the Street. While many of his counterparts have been talking up things like the cyclicals, saying that with the world recovering it's time for money to come out of high-multiple stocks, Applegate's continued to pound the table on big-cap growth.
Sure, he admits, there may be periods of cyclical outperformance, but he just doesn't trust in his ability as a market timer to catch those moves. So he focuses on the stocks he thinks that, a year or so from now, you'll wish you owned more of.
Source: Lehman Brothers
Packed with growth, the top-10 list looks like something Applegate would come up with. It isn't. "This whole process is completely unencumbered by any kind of macro call," says Applegate. "We challenge our analysts to pick out the stock they think can outperform the market in the 12-month period starting today. It really is bottom-up."
Applegate does find the list instructive on the macro level, however. He points out that nine of the names on the list are world plays that participate in the "ongoing globalization process." And six of the companies on the list participate in what he calls the "convergence of PCs, telecom and telephony" -- a major theme of his lately.
The List in Review
Here are some comments from Applegate on the Uncommon Values roster:
: "They are the world's dominant Internet brand," says Applegate. Lehman expects AOL to make inroads in broadband and to be the premier name in Internet retailing.
: "The company is successfully recreating itself from a distance carrier to a leader in voice and data." It is also increasing their global reach.
: "Ford is in the process of retooling itself so it can continue to deliver and stable earnings." Its luxury car brands --
-- should drive earnings. Also, the company will probably spin off its parts division within the next few years.
: The 13th-largest regional bank holding in the U.S., last year Firstar "surpassed everyone's expectations realizing the cost savings of the
merger." This year, Firstar should do the same with its
: "Set-top orders should continue to accelerate and the company is also working to develop IP-based technology." Furthermore, General Instrument has some stock gains on its balance sheet that are not fully reflected in its price today.
: The sector's coming off some tough times, the company's moving into new businesses and, with
exit from the space, there's "shrinking competition."
: "These guys are the dominant global suppliers of inspection and testing equipment for the semiconductor industry." As chipmakers move to 0.25 micron and copper processing, orders should flow in.
: "It's gotten down to where it's trading at a market multiple," as the whole drug sector took lumps. "You've had some concerns about competition to
," but the market is failing to recognize that the company's product pipeline looks good.
: "While antitrust and other worries are going to hang on the stock, we still think they'll be able to maintain their 25% growth rate." And don't forget Windows 2000 -- a "$40 billion product."
: "Tyco is somewhat unusual in today's world because it's one of the few conglomerates out there. We liken it to
-- they've been very smart at growing through accretive acquisitions. They should be able to get earnings growth up to the 20% to 25% range."