Barrington Updates Best Stock Picks for 2011

BOSTON (TheStreet) -- Barrington Research has updated its market-beating list of Best Ideas for 2011, which includes stocks such as Sirius XM (SIRI), Imax (IMAX) and others it expects to rise up to 97%.

Investors may not be as familiar with Chicago-based Barrington Research as they are with Morgan Stanley or Credit Suisse, but the firm's Best Ideas List outperformed key benchmarks in 2010, when it was first started.

Barrington's list is updated quarterly and represents analysts' top picks for the coming 12 months. It is currently composed of 16 stocks with an average market value of $1.3 billion and median market cap of $800 million. Since inception on Jan. 1, 2010, Barrington's best stock picks have risen 56.4%, outpacing gains on the S&P 500 (18.4%) and the Russell 2000 (32.3%).

That success continued in the second quarter, as the Best Ideas portfolio was up 8.3%, excluding dividends, compared with a 0.4% dip on the S&P 500 and a loss of 1.9% on the Russell 2000. Through half of 2011, the Best Ideas portfolio has rallied 15.7%, handily beating a gain of only 5% on the S&P 500 and 5.6% on the Russell 2000.

At the top of the portfolio's best performers during the first quarter, Bridgepoint Education ( BPI) rallied 46%, Echo Global Logistics ( ECHO) jumped 35% and Sirius XM climbed 32%. On the downside, Conceptus ( CPTS) and Navistar International ( NAV) dropped about 19% each.

The latest overhaul sees three new additions the group, while Cabela's ( CAB) and Copart ( CPRT) have been axed. The 16 stocks now on Barrington's list are arranged below in order of potential upside, based on the firm's 12-month price target and the stock's closing price as of June 30.


Echo Global Logistics ( ECHO)

Company Profile: Echo Global Logistics is a provider of technology-enabled business process outsourcing, serving the transportation and logistics needs of its clients.

Current Share Price: $16.77

Potential Upside from June 30: 1% based on a price target of $18

Barrington's Take: Though the stock trades nearly at the firm's price target following a 40% rally this year, Barrington analysts are still fans of Echo Global as the company's "technology offerings are a competitive differentiator that will enable the company to continue gaining share of a large and underpenetrated market opportunity."

"Despite projected long-term earnings growth for Echo that is approximately three times faster than the average of its peers, shares of Echo are valued at only a modest premium to the peer group average," the analysts write.

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Sirius XM Radio ( SIRI)

Company Profile: Sirius XM provides music and talk radio entertainment through satellite transmissions.

Current Share Price: $1.77

Potential Upside from June 30: 10% based on a price target of $2.19

Barrington's Take: Despite the occasional correction in the stock, Barrington analysts note that Sirius XM has had very strong momentum over the past two years.

"We feel upside remains, though not to the degree enjoyed by those willing to take on the significant risk as the stock bounced off the bottom," the analysts write. "The investment focus has shifted to fundamentals since the company's brush with bankruptcy. Improvements include positive, if choppy, trends in auto volumes, the potential for price increases and the chance to return cash to shareholders out of rising free cash flow."


Imax ( IMAX)

Company Profile: Imax is an entertainment-technology company, specializing in motion-picture technologies.

Current Share Price: $26.69

Potential Upside from June 30: 17% based on a price target of $38

Barrington's Take: Imax remains on the Best Ideas List thanks to "an appealing long-term growth story as management executes its footprint expansion program both domestically and internationally," Barrington analysts write.

"Imax remains early in its growth overseas, although international agreements are being struck with increasing frequency," the analysts add. "Footprint expansion is key to longer-term growth, overriding volatility from current theatrical success in our investment thesis."

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Constant Contact ( CTCT)

Company Profile: Constant Contact provides on-demand e-mail marketing, social media marketing, event marketing and online survey solutions to small businesses.

Current Share Price: $22.19

Potential Upside from June 30: 18% based on a price target of $30

Barrington's Take: Constant Contact is a new addition to the Best Ideas List, as Barrington analysts say the company "offers investors an appealing long-term growth story and is trading at an attractive valuation, in our view."

"We believe that Constant Contact's approach of free coaching, customizable templates, and insightful analytics combined with its dominant share of email marketing and CEO Gail Goodman's leadership is a formula for success in social," the analysts add.


Sirona Dental Systems ( SIRO)

Company Profile: Sirona Dental Systems makes advanced dental equipment.

Current Share Price: $54.91

Potential Upside from June 30: 19% based on a price target of $63.

Barrington's Take: Sirona "offers investors an opportunity to leverage the overall recovering dental industry and rapidly growing high-tech dental equipment market with a company that has a competitive advantage as the technological leader in the industry," Barrington analysts wrote.

The analysts note that shares are relatively inexpensive compared to the company's growth potential, trading at a 2012 price-to-earnings multiple of 16 times, below its five-year average of approximately 20 times.

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InnerWorkings ( INWK)

Company Profile: InnerWorkings is a provider of managed print services to corporate clients across a range of industries.

Current Share Price: $8.27

Potential Upside from June 30: 20% based on a price target of $10

Barrington's Take: InnerWorkings "offers investors an appealing long-term growth story, and we believe current business momentum is strong as well," Barrington analysts write.

"InnerWorkings is bringing sophisticated procurement methods to a large and inefficient industry with significant excess capacity. Despite the emergence of digital technology, the commercial printing industry is expected to remain very large well into the future," the analysts add.


Bridgepoint Education ( BPI)

Company Profile: Bridgepoint Education is a regionally accredited provider of post-secondary education services, which includes programs in the disciplines of business, education, psychology, social sciences and health sciences.

Current Share Price: $27.42

Potential Upside from June 30: 20% based on a price target of $30

Barrington's Take: The firm says Bridgepoint Education remains a top pick for 2011 for the same reasons Barrington picked the stock in 2010, namely discount valuation, strong fundamentals, experienced management team, a scalable business model and a solid balance sheet.

"Bridgepoint's stock has plenty of catalysts...to help it move higher over the next 12 months," Barrington analysts wrote. They note the unprecedented high level of short interest -- 49% of the float was sold short as of June 15, down from 58% in April -- that continues to get squeezed.

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Modine Manufacturing ( MOD)

Company Profile: Modine Manufacturing is engaged in thermal-management technology, serving the vehicular, industrial, commercial, building HVAC (heating, ventilating and air conditioning) and fuel cell markets.

Current Share Price: $14.95

Potential Upside from June 30: 30% based on a price target of $20

Barrington's Take: Modine Manufacturing, which was added to Barrington's best picks list in January, "continues to be our favorite small capitalization industrial investment." Barrington analysts say the company "is a great recovery story with increased sales and improved outlook across all of its business segments."


AtriCure ( ATRC)

Company Profile: AtriCure is a medical-device company that makes surgical ablation systems designed to create precise lesions, or scars, in heart tissue.

Current Share Price: $13.83

Potential Upside from June 30: 32% based on a $17 price target

Barrington's Take: The research firm notes that atrial fibrillation is the most common type of cardiac arrhythmia, with at least 2.5 million people diagnosed in the U.S. "ATRC has the only approved left atrial appendage product that is effective on the U.S. market and the only product we expect for at least three years," Barrington analysts write. "ATRC has a great team, unique products, few competitors, a deep product pipeline and below average valuation."

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VCA Antech ( WOOF)

Company Profile: VCA Antech is an animal healthcare company, providing veterinary services and diagnostic testing to support veterinary care.

Current Share Price: $21.69

Potential Upside from June 30: 32% based on a price target of $28

Barrington's Take: VCA Antech is one of three new additions to the Best Ideas List, as analysts are impressed with the company's "appealing long-term growth story" and the stock's attractive valuation.

"The market for acquisitions has been relatively slow for WOOF over the past two years, due mostly to the economic downturn and the resulting unwillingness to sell at the bottom/inability to retire due to lower retirement assets," Barrington analysts wrote. "However, we believe expectations have adjusted and WOOF is in for a period of increased acquisition activity, driving growth on the top and bottom line."


Navistar International ( NAV)

Company Profile: Navistar produces International brand commercial and military trucks, MaxxForce brand diesel engines, IC Bus brand school and commercial buses, Monaco RV brands of recreational vehicles, and Workhorse brand chassis.

Current Share Price: $55.08

Potential Upside from June 30: 33% based on a price target of $75

Barrington's Take: Navistar remains a top pick for Barrington "due to the company's low valuation relative to the expected growth rate in commercial vehicles."

"NAV's focus on such fuel efficient innovative products together with continued cost reduction efforts should promote sales growth, as well as operational leverage in the upcoming future," Barrington analysts wrote.

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Grand Canyon Education ( LOPE)

Company Profile: Grand Canyon Education is a regionally accredited provider of online post-secondary education services focused on offering graduate and undergraduate degree programs in its core disciplines of education, business and health care.

Current Share Price: $14.28

Potential Upside from June 30: 44.8% based on a price target of $21

Barrington's Take: Grand Canyon was one of the worst-performing stocks on Barrington's Best Ideas List in the first quarter, dropping more than 25% during the first three months of the year. Still, analysts note that the stock stabilized in June with an 8% gain and that it still remains highly attractive based on valuation.

"As such, we are keeping Grand Canyon Education on the Best Ideas List, impressed by its differentiated model (which is perceived favorably by the public), attractive long-term prospects, higher (than average) projected earnings growth and very little regulatory risk," the analysts write.


NetSpend Holdings ( NTSP)

Company Profile: NetSpend provides reloadable prepaid debit cards cards and related alternative financial services in the U.S.

Current Share Price: $8.56

Potential Upside from June 30: 50% based on a price target of $15

Barrington's Take: Another new addition to the Best Ideas List, NetSpend is Barrington's way of playing the more than 60 million individuals in the U.S. that are underbanked or unbanked altogether.

"In our opinion, NTSP has the ability to grow its revenues in excess of 20% annually with adjusted EBITDA and adjusted net income growth of 25% to 30% annually over a three- to five-year time period," the analysts wrote.

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PRGX Global ( PRGX)

Company Profile: PRGX Global provides recovery audit services to businesses and government agencies having numerous payment transactions.

Current Share Price: $7.14

Potential Upside from June 30: 54% based on a price target of $11

Barrington's Take: PRGX Global was a new addition to Barrington's top picks in January. The research firm says PRGX "is no longer a turnaround story but an emerging growth story," which is why it remains on the Best Ideas List.

"That said, we expect 2011 to be even better as management continues to focus on execution," the analysts wrote. "PRGX's ability to transform itself into a growth company by leveraging its existing relationships (and winning new clients), via a more diversified service offering, is just beginning to manifest itself in solid revenue and earnings growth, which we expect to accelerate in 2012 and beyond."


U.S. Auto Parts Network ( PRTS)

Company Profile: U.S. Auto Parts Network is a distributor of aftermarket auto parts and accessories. Its products consist of body parts, engine parts, performance parts and accessories.

Current Share Price: $7.83

Potential Upside from June 30: 57% based on a price target of $12

Barrington's Take: U.S. Auto Parts Network was a new addition to Barrington's Best Ideas List in January and remains among the firm's best picks.

The company "represents a solid long-term secular growth story due to the shift to online auto parts sales by consumers, management's efforts to add products and increase conversion rates, potential market share gains and benefits that should accrue from the transformational acquisition of JC Whitney," the analysts write.

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Conceptus ( CPTS)

Company Profile: Conceptus makes the Essure permanent birth control system, an innovative and proprietary medical device for women.

Current Share Price: $12.30

Potential Upside from June 30: 97% based on a price target of $23

Barrington's Take: Conceptus, which was added to Barrington's Best Ideas List in January, has faced three major headwinds including competition from Adiana, a change in coverage in France and a weak job market. But Barrington analysts still view the company as an appealing long-term growth story with attractive valuation.

"Management expects the competitive and economic headwinds to persist over the near term, however, we expect the company's revenue growth to reaccelerate in the back half of 2011 due to the additional reps added to the sales force in 2010 becoming more productive," the analysts wrote.

-- Written by Robert Holmes in Boston.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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