Market Overview

Top Stock Picks Of The Month (GOOG, BRK, TSCO)


Google’s (NASDAQ: GOOG) license to operate its website in China has recently been renewed. On the same day, analyst Clayton Moran of Benchmark Co reiterated his “buy” rating on GOOG’s stock. He also maintained his price target for Google, owner of the world's most-used search engine, at $600.

In his research note, Moran said that GOOG is set to announce its second quarter results on July 15. He expects the company to post $4.9 billion of revenue and $6.18 of adjusted EPS. He mentioned that the company is likely to see sustained momentum in its search business and YouTube video Web site.

According to Moran, “Google has no debt, $82 per share in cash, and should generate (more than) $29 per share in 2010 free cash flow… Given clear signs of economic improvement and strength in its core search business, we believe Google's stock is oversold.”

Another great pick is Tractor Supply (NASDAQ: TSCO), which operates 967 farm-equipment stores. Analyst John Lawrence of Morgan Keegan had, on July 8, maintained his “outperform” rating on the stock, a day after the company upped its earnings projections for the full year to $4-$4.10. The forecast now exceeds the consensus of $3.73.

TSCO has also guided its EPS for the second quarter at $2.03-$2.05, substantially ahead of Lawrence’s estimate of $1.61. The company’s net sales for the quarter rose 13% year-over-year, while comparable-store sales increased 6.1%, aided by favorable weather conditions, Tractor Supply’s effective management on markdowns and impressive results from the consumable and edible goods segments.

According to John Lawrence, the stock is "undervalued," considering the current sales trends and earnings growth rate in 2010. He believes that TSCO’s earnings growth may overshoot his revised estimate of 28% growth.

Berkshire Hathaway (NYSE: BRK.A) is also a top pick. On July 8, analyst Meyer Shields of Stifel Nicolaus cut his rating for the stock to “hold.”

In his research note, Shields blamed the rating change to "our weak macroeconomic outlook,” which implies that earnings in the second half of 2010 could be weak. "We think declining consumer confidence will slow consumer spending, as employment very slowly recovers," he added.

According to Shields, "a shrinking appetite for increased public spending" may place a cap on the size of future economic stimulus packages. Meanwhile, a potential increase in oil prices to above $85 a barrel may have a limiting effect on discretionary spending by consumers.

He also mentioned, "Investors' focus on Berkshire's book value for valuation (implies) that its shares could outpace broader market's declines."

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Posted-In: Benchmark Clayton MoranAnalyst Color Long Ideas News Markets Analyst Ratings Trading Ideas


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