Despite recent turmoil in the IT sector for 2008, I contend that this is now where you want to be. Reasoning here follows that the financial sector is struggling to keep its bad news buried, the housing market is shambles and even retailers are struggling to sustain growth. A move toward tech seems fully logical due to typically strong international exposure, confident balance sheets and the fact that IT stocks hold a historically low correlation to the broader markets. Lets pick some technology bulls.

Consumer Electronics - The Net Fool picks Apple (NYSE: AAPL)
Hey Mr. Market, why so down on Apple? The iPod business is fully matured. The iPhone is losing inventory to similar devices. MacWorld was missing its usual superstar prospect. I tell you what, take this news and know that Apple has historically done its best when sentiment is low. Steve Jobs & Co. is my favorite IT pick for 2008. The downside has opened up value in the stock, and I feel they have bottomed!

Looking further into the concerning issues. The iPhone was selling less because of Apple’s push into the new iPod Touch, the analysts at Needham noted that “Apple would have sold close to four million iPhones in its absence.” Add this to the fact that an estimated 25%-30% of iPhones were “unlocked” from AT&T, a number that actually benefits AAPL through the carrier’s headache. While iPod sales were slowed, I feel that the mp3 device is merely in a transitioning phase, and interesting opportunities are now raised in mobile technology.

I feel that AAPL may be a recession resistor. Mac business is healthier than ever, and single-handily offset losses in iPods. Investors are punishing high-end firms like Apple for any disappointments. The stock is 35% off its highs, trading at a premium 24-times-earnings compared to its peer’s 32x and has a PEG of 0.7x. They’ve got the free cash flow we love ($6.78/share est. 2008) and its business segments have never looked healthier. People are hating on this company for no reason. As Warren Buffet puts it: “Be fearful when others are greedy, and greedy only when others are fearful.”

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The industrials sector of the stock market is where I am most involved nowadays. While the big names like General Electric (NYSE: GE) and Caterpillar (NYSE: CAT) may not jump out at you as big gainers, plenty of these rock-solid companies have been hit unfairly, and I see value. As an added bonus, industrials companies often act as a hedge to thriving markets like agriculture. We’ve got some killer stock picks for this week, lets see what we can dig up.

Industrial Machinery - Harsco (NYSE: HSC)
I may be a sucker for fallen stocks, but Harsco’s drop off their highs was especially unwarranted. You want proof? How about beating fourth-quarter earnings estimates of $0.70 with $0.74 and increasing 2008 guidance. How about topping revenue expectations by $75 million. Harsco manufactures in mill services and gas technologies.. they are the top dogs in a boring market, and I’m loving it. A whopping 70% of their sales are international, and even in a slowing world economy, an unusually high rate of recurring service revenues gives me confidence in Harsco’s ability to maintain earnings momentum.

Don’t be concerned with rising costs and problems in home construction, Harsco’s end markets such as global steel production and non-residential construction are expected to remain firm in 2008. Despite slight challenges in Mill Services in the most recent quarter, Harsco outperformed with strong gains in Rail & Mineral Technologies. I see nothing but upside in growth for 2008, and with a key acquisition possibility, Harsco could completely out-do themselves. Access Services has a nice hedge against a possible falling non-residential construction since about 25% of their industrial maintenance business is recurring. Very protected from a slow-down, and undervalued at $55 versus a target of $75… I put a purchase price at under $54 for Harsco.

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Health care, healthcare or health-care, any way you slice it… the bulls are registering PROFIT in the sector for 2008. In fact, over the last month they have been one of the only consistent gainers in the entire market! I got some great movers that have traded up and subsequently gotten hit and are now undervalued. Value and defense is how we trade the market in 2008… so a big dog who has a favorable year in store should get the call as well. I smell a victory, lets make some money.

The Net Fool Picks Intuitive Surgical (NYSE: ISRG)
Robotic surgery. No longer do we have human error, the da Vinci system by Intuitive Surgical has taken care of that. Fourth-quarter earnings absolutely stomped expectations from ISRG, following higher than expected sales of the expensive surgical system. There are now 795 systems deployed worldwide, and they sold 78 last quarter. Each system is very expensive, but ISRG is proving to investors they mean business. They more than doubled quarterly profit and increased guidance for 2008.

I think projections for 2008 were actually conservative, and Intuitive Surgical should blow through them. Even after the initial surge, I still see 20%+ upside potential for growth over the next twelve months. I expect these guys to place 75-80 new systems next quarter, and with profit ever-increasing from existing device accessory parts, it seems like a bulldozer stock in my eyes. I am convinced that this robotic surgery technique will become a surgical niche standard over the next few years. Many were skeptical of the capabilities of the system, but little if any complaints or problems have been filed so far. 51% of physicians expect their facilities to purchase additional da Vinci system(s) over the next three years. 73% of urologists indicate they no longer perform open prostatectomy procedures without a da Vinci system. The product works, people love it, you will be sorry if you turn your nose up at the market’s stock pricing.

The Net Fool Picks Gilead Sciences (NYSE: GILD)
Gilead is a front-running biopharmaceutical company that has enjoyed steady growth for years. Without exception, I am affirming that Gilead will outperform the market and see growth in 2008. With this in mind, GILD is a safe haven in a shaky market. However, the catalysts don’t go unnoticed! They have a rock-solid HIV franchise and a management team that knows how to generate strong growth in EPS and revenue. They’ve got the free cash flow to stay afloat, and the potential for a big winner in HIV diagnosis.

I’m putting a target price on Gilead for $49, based on analyst consensus and my own findings. Okay so they beat earnings out by a cent, not great, but at this point Wall Street doesn’t care… it’s all about 2008 and Gilead has the cure! Better than expected 12-month sales guidance was a surprise, and we still see good upside potential in the company developing a new hit. These guys could take a hit in the short-run, setting up a nice buying opportunity. I am giving them the green light at an attractive price due to upside potential from the pipeline, consistency in earnings and margin growth, stability from being an industry leader and, more importantly, expected gains in non-HIV franchises. Read the rest of this entry »

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EDIT: We all make mistakes. A lot of people have gotten burned on their Bear Stearns holdings. While I merely recommended this stock as a short-term speculative buy, I do not want anyone to get the wrong idea and think that I am still recommending them. The “heat” surrounding the financials sector has died down, but I stay fast with my recommendations on LYG, SPG & AFL as the banking sector is the main bad spot here, but international banks are still out of the hot water. Best regards.

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The Financials sector of the stock market is HOT HOT HOT! After the sub-prime mortgage crash all but wiped out stock value, investors seem to have found a bottom (or support for you technical guys) and values have begun to turn around. This is certainly one of the hottest areas to invest because of the oversold , undervalued companies that were normally safe refuge against volatility. Lets find some winners.

Banks - The Net Fool Picks Lloyds TSB (NYSE: LYG)

Lloyds TSB is one of the leading UK banks. As such, many investors first figured they would be hedged against the sub-prime crash in the United States. They weren’t. However, they are now insanely undervalued and should rebound strongly with the rest of the financial companies. LYG is trading cheap at just 7.7 times earnings, and show big upside with minimal downside. I contend that UK banks have much more value than United States banks.

Lloyds TSB was upgraded to a “strong buy” by Standard and Poor’s, improving investor confidence and raising bids on the trading floors. LYG recently raised its dividend because of their strong free cash flow to 7.90%, this virtually guarantees profit for 2008 in my books. Competition is fierce in the UK financial services business, but there are a lot of growth opportunities. Their 12-month target was raised to $57, which is virtually a double from their current share price. Their strong free cash flow should allow them to make strong moves to drive demand, and a beta at 0.78 is irresistible. Get LYG on your 2008 wish list. Read the rest of this entry »

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During recessionary times, some of the safest places to invest in the stock market can be found in materials company. The gold & silver sub-industry has been one of the few positive gainers year-to-date. Generally more stable than most industries through troubled times, the basic materials sector is in a great position to make money in 2008.

Chemicals - The Net Fool Picks Mosaic (NYSE: MOS)
The Mosaic Company doubled about 2.5 times in 2008, and they have room to grow. While they hit a high at around $110 and are down now to $80, I am thinking they will fall off a bit more ($72-$76) which is where you buy. So what exactly do they do? Mosaic produces chemical fertilizers used to feed crops and animals. The agriculture sector is one of the safest in a recession, and Mosaic has been red hot.

The S&P upgraded their credit rating to “BB+” on January 11th because of strong operating results, and Reuters/Multex finds them outperforming the market for 2008. Their competitors, Agrium (NYSE: AGU) and Potash (NYSE: POT) are simply not as safe as Mosaic in an economic downtrend. Agrium has a much smaller market cap at under 8 billion (Mosaic is at 35.5 billion), and you need a large-cap performer in these conditions. Potash has the market cap, but is trading at a higher multiple then Mosaic and their PEG ratio of 3.8 is too high for their own good. Time to get bullish on Mosaic.

Metal Mining - The Net Fool Picks Rio Tinto (NYSE: RTP)
Looking at the 5-year chart, the sky is the limit for Rio Tinto plc. Top competitor Vale (NYSE: RIO) is in talks to acquire Anglo-Swiss mining group Xstrata, but “warned a deal would be difficult to pull off in current market conditions.” I don’t think it will go through, but on the other hand, RTP is an acquisition target for BHP Billiton… a much more likely deal. This merger “would make large cost reductions possible” according to Standard and Poor’s, and would lend added exposure to oil and natural gas.

While the merger proposition looks promising, even it fails, Rio Tinto has a lot of upside after a drop-off in January. Producing minerals and metals from diamonds and copper to coal and salt, RTP has the market hedging we love to see. Commodity prices should remain relatively strong in a receding economy, so Rio Tinto has that safe play look with the strong upside of being acquired. Read the rest of this entry »

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