Stock Picks From The Best Overseas Biz Climes

WASHINGTON, D.C. – For the past several years, we’ve used data from the International Finance Corp., the private sector arm of the World Bank, as a starting point for an international stock search. We’ve had moderate success with the approach, so we’re giving it another go.

The data in question comes from the IFC’s annual “Doing Business” study, which measures how easy it is to do business in a particular country. Namely, the survey quantifies the time and costs involved in starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

This morning, the IFC releases “Doing Business in 2007: How to Reform,” which ranks 175 countries in those categories. The survey, for which the IFC surveyed 5,000 local experts, is a treasure trove of information for Beltway wonks, especially those interested in how red tape affects developing economies.

Full story at Forbes.com

Buying Opportunity In Government Tech

WASHINGTON, D.C. – SRA International, a tech services and consulting concern in Fairfax, Va., has twice graced our annual list of America’s Best Mid-Caps. But making that elite cut hasn’t protected the company’s stock price, down 21% over a one-year period.

The dip may be an investment opportunity.

What’s bothering SRA International’s stock? Among other factors, explains A.G. Edwards analyst Mark C. Jordan, the high cost of waging war in Iraq and Afghanistan has created uncertainty and delay, which is affecting spending on the information technology services that SRA provides: designing, managing and protecting networks for government agencies. The company does just under three-fifths of its business with national security customers, 32% with civilian government agencies and 9% in health care, along with a smattering of commercial work.

Full story at Forbes.com

Weighing SafeNet’s Dangers

WASHINGTON, D.C. – A wary analyst community awaits SafeNet’s second-quarter financial results, set for release Wednesday evening. The last four earnings announcements from the Belcamp, Md., information security concern have fallen short of Wall Street expectations, and at a recent $15, the stock has lost three-fifths of its value since a high set in October.

Adding to the gloom: the overhang of an investigation by the Securities and Exchange Commission into SafeNet’s stock option grants. The company got a related subpoena last May.

With the slide in its stock price, SafeNet’s $364 million market value is now well below its book value, while its price-to-sales multiple is 1.4. The North American technology sector as a whole goes for 1.6 times revenues. Contrarian investors, particularly those interested in government contracting plays, may want to take a gamble on this beaten-up stock.

Full story at Forbes.com

Israel’s War Discount

WASHINGTON, D.C. – Feeling contrarian and in the mood to bargain hunt? Go for U.S.-listed shares of Israeli companies. The accompanying table lists a few notables.

We’re not downplaying the present difficulties in the Middle East. In fact, we’ve heard firsthand of nervousness among Israelis and the multiple threats to the country’s economy: people staying close to home or in bomb shelters, a sluggish tourism industry and the disruption of port activity in Haifa.

Full story at Forbes.com

Papers, Please

Washington, D.C., never wants for looming deadlines, and here’s a date that has Beltway bureaucrats and contractors scurrying: Oct. 27, 2006. That is when all federal agencies must be able to issue employees identification cards meeting technological standards demanded by President George W. Bush and developed by the National Institute of Standards and Technology.

“Everyone is working hard to meet this challenging deadline,” chirped a White House press release last week.

Whether everyone meets the deadline or not doesn’t matter much to Jay M. Meier, senior analyst at Minneapolis’ MJSK Equity Research. “If it’s Oct. 27 or March 27,” he says. “I don’t care.”

Meier covers a handful of technology outfits, several with an interest in credentialing: Fargo Electronics, Identix, LaserCard and Zebra Technologies. While his ratings vary among those stocks, he’s bullish on the identification business as a whole, deadlines or no. “The opportunity is so big,” he argues.

Full story at Forbes.com

Defense Play: Big, Cheap And French

WASHINGTON, D.C. – Investing, internationally or otherwise, requires making contrarian calls now and then. Thales, a French defense and technology concern, looks like one such situation.

Thales’ Paris-listed shares are down 25% from a 52-week high (a U.S.-listed depositary receipt is thinly traded over the counter and not sponsored by the company). By several measures of valuation, the stock looks cheap relative to industry averages for both European and North American aerospace and defense concerns.

It also looks reasonable relative to its own history. For example, it changes hands at 6.8 times cash flow (in the sense of net income plus depreciation and amortization). Over the last five years, the average is 8.8.

Full story at Forbes.com

Flir Systems: Seeing Beyond Government Sales

WASHINGTON, D.C. – It’s been a frustrating year for shareholders in Flir Systems, the maker of thermography and infrared imaging technology. The stock has lagged the S&P 500 by 22 percentage points and trades 35% below a 12-month high set last August.

The slow spell could be a good time to do some buying. “Flir has an interesting story to tell,” says Michael Davies, senior research analyst at Next Generation Equity Research and a bull on the company (his employer does no banking or other work for it).

Part of what makes that story interesting, as Forbes reported last October, is Flir’s products and customer roster. The Wilsonville, Ore., company sells gadgets like portable thermal imagers, which law enforcement or military personnel can use to track targets obscured by darkness, dust, haze or other obscurants. Flir’s cameras are the most widely used to monitor the U.S. border.

Full story at Forbes.com

Power Player

Not much has changed since the reformers went after stock analysts in the aftermath of the tech bust. Brokerage firm analysts are still, for the most part, bullish; it’s hard to make a living telling people what not to buy. And their employers still make much of their revenue doing investment banking for companies the analysts are expected to evaluate. Still, the best of the breed certainly earn their keep by making accurate forecasts of earnings. Sanjay Shrestha is one of these.

Shrestha fits the sell-side archetype. He rates 15 of the 18 stocks he covers a “buy” or a “strong buy,” and many of those are companies for which his employer, First Albany Capital, either makes a market or does investment banking. That hasn’t stopped him from making extremely accurate predictions about earnings. For two years he has won a spot in our Best Analysts rankings, based on data maintained by StarMine about individual forecasts.

The 32-year-old Shrestha is quick with a laugh and holds forth freely on topics such as the implications of the polysilicon shortage, the history of 20th-century energy infrastructure or the political turmoil that has recently shaken Nepal, the land of his birth. He has hopes for a return to peace in Kathmandu and is grateful for the opportunities he’s had in America. On an undergraduate scholarship to the College of St. Rose in Albany, he switched from his prior interest in science to finance and turned that background into a Wall Street career. In 2000 he took a job at First Albany covering companies that are developing new energy technologies. Two years later he added the engineering and construction services sector.

Full story at Forbes.com (reg. required)

Stock Picking Contest: Update

Halfway through our annual stock picking contest, the bears have the edge. On average, their picks have declined 1%, versus the market’s 5% advance since last Halloween. Bulls, as a group, are just beating the market with a 6% gain as of yesterday’s close.

We call this exercise “Love Only One,” and we’ve been doing it for decades. The gist of it is to pit the finest minds on Wall Street against the market. Twelve bulls each give us one stock they think will beat the S&P 500 over a one-year period, while five bears offer up one that need only lag the index’s performance. Anyone successful gets invited back for another year.

Full story at Forbes.com

Congress Tees Up Dividend Stocks

WASHINGTON, D.C. – In early March, we noted that Beltway analyst Stuart Sweet saw a 70% likelihood that Congress would extend tax rate cuts on dividends. It took a bit longer than Sweet expected, but that extension now appears to have a rendezvous with President George W. Bush’s pen.

At the time of our earlier story, we also relayed that Sweet, based on his bullishness on the tax-cut extension, was advising clients to consider stocks paying nice dividends. So we put together a list of five dividend standouts. As of midday today, that group was up 8%, on average, versus the market’s 3% advance.

Full story at Forbes.com