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No. of Recommendations: 2
This is year two of my end of year exercise to identify what I believe are my top 10 holdings for the coming year. These are the 10 stocks that I already have in my portfolio, that for one reason or another I feel have the best chance of doing well in the next year or so. These are all, of course, only my opinion, and I'd hate for anyone to invest in these, lose their money and blame me. So don't even think of investing in these without doing your own research. Targets are my naive idea of what I think is fair value for each of these.

1) FRE: Freddie Mac looks like a good value about any way I look at it. Projected earnings yield of around 10% and even better trailing earnings. Growth in an environment of rising interest rates may be tricky. New this year. Target = $100.

2) BKR: Michael Baker has had some big write-offs in the last couple of years, but that all seems to be behind them now. They've shown a good return to profitability and are still reasonably priced by most measures. Target: $25.

3) BBOX: Fundamentally sound. What I feel is reasonable valuation based on price/book and price/earnings. They've done a great job watching their costs in a tough year. Introduced a small dividend this year. I've revised my target down slightly. Target: $85.

4) MCD: McDonalds seems undervalued here and has moved up the list due to underperformance the past year. Certainly they've had their problems and they are not the growth story they used to be. Still the McDonalds name deserves a premium they don't seem to be getting here. Target = $30, about the same as last year.

5) DIS: Disney is a new pick this year. Disney is pretty beat up at these prices. While not a no-brainer at these values, it's selling at a discount to historical valuations. Target = $30.

6) BOSA: If they can recover and show some earnings growth it'll be fine. I like the p/b ratio, relative to historical, and the dividend. Would like to see a return to growth and better margins, but they've managed pretty well in a tough market. Will be interesting to see how the auto speaker business does once it's up to speed. Moves down the list a bit from last year because their earnings declined, but the price didn't. Target = $15, about the same as last year.

7) WM: New this year. Attractive by most any measure. They increase the dividend every quarter and the yield is attractive. I really like WM as a good conservative pick. Target = $60.

8) GM: New this year. Attractive valuation. Have they been canabalizing future sales with incentives? Are pension liabilities going to be a problem? I don't know, but the projected p/e for the next couple of years has me drooling. Target = $70.

9) TLGD: New this year. Telecom spending will eventually recover and TLGD is positioned to be there when it does. Strong Balance sheet. Target = $30.

10) MRK: Priced attractively based on p/b and p/e compared with historical and rest of industry. Medco spinoff this year? Good dividend yield. Target = $80, about the same as last year.

Stocks that were replaced on the list:

NTBK: I still like Netbank, and if their earnings are even close to projections this year, the price is attractive. I still hold NTBK.

ZOMX: It was a bad year for Zomax. I do think they will recover, but it may be late this year or even into 2004. Balance sheet is still good. Just too many other stocks I like better right now to make the top 10. I still hold ZOMX.

MSFT: Just misses the cutoff. I had MSFT and MRK in essentially a tie to make the list. I just like MRK better. I still hold MSFT.

BA: I sold Boeing at a nice profit before it came back down again. I may be a buyer again if it drops some more.

BRK.B: I sold Berkshire this year, mainly because I don't have a good feeling of how to value it.

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