The 3 stocks to buy: EBAY, CSCO and HAL
03-08-07: The market has finally found some footing after a week of sell-off. Rational thinking is finally beginning to overcome irrational behavior. Looking at the macroeconomic view, the economy shows no sign it is headed towards a recession. In fact, Allan Greenspan’s recent comment that the economy faces about 33% chances of recession was taken out of context. The China sell-off was probably a needed correction. In some respect, the recent sell-off is turning out to be a blessing in disguise as we were able to acquire additional positions of solid companies at a discount. Although the market has been up in recent days, there still many bargains out there. Here are three stocks we are looking to buy.
Ebay Inc (EBAY) at $31.00 is trading at a discount. For the sake of argument, let say the economy does slip into a recession, we believed Ebay will probably benefit as they did during the last recession. We would no qualify Ebay as recession proof by any means, but very close. The rational is when people have less to spend; they will turn to Ebay in the hope of saving money. This happened during the last recession and it will probably happen again if the economy slows down.
Buying Ebay at this level represents minimal risk. We doubt this stock will fall back to the mid 20s again. Our 12 month price target for Ebay is $40 assuming the overall market sentiment remain somewhat optimistic. If not, we see this stock at around $35.
Cisco Systems (CSCO). A few weeks ago after Cisco reported a respectable earning; this stock was trading at $28 per share. Today it closed at $26.15. Their fundamentals have not changed. That is the most important thing to keep in mind. The only thing that changed is the market sentiment, which appears to be improving.
A few weeks ago investors were bidding up this stock at $28 per share; today the same stock is 2 points lower. This to us represents a buying opportunity. In fact, even Wall Street has realized this and has issued a call to buy. Our 12 month price target for CSCO is $35 per share, that’s 35% from today’s closing price if things go as planned.
Halliburton (HAL). We mentioned this stock before and will say it again; this stock is still cheap at $31.73. Our prediction is when they finally sell the remaining shares of KBR, Halliburton will probably announce a large stock buy back and further increase their dividend. Moreover, if you have not noticed, oil is trading above $60 again. If oil remains at this level, Halliburton should have no problem reaching our 12 month price target of $40 per share. Flushed with cash, this company will also be able to withstand any economy slowdown.
