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Author: jjaym Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2753  
Subject: Stocks for 2004 Date: 12/26/2003 6:30 PM
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This is year three 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 still looks like a good value about any way I look at it. Though it was good to get the restatements behind us, I'm anxiously awaiting some more up-to-date financials. A repeat in the number 1 position and hopefully this year it finally pays off. Target: $120.

2) SBC: New this year. I was looking for a low p/e high yield stock at or near 52-week lows and picked this one up in October. Target: $50.

3) BBOX: Fundamentally sound. What I feel is reasonable valuation based on price/book and price/earnings. Revenue decline is a concern. This is a repeat from the last couple of years but I've again lowered my target. Target: $65.

4) LTD: New on the list this year, though it's been in the portfolio since January. Good earnings and dividend. Target: $25.

5) MSFT: Microsoft returns to my top ten list after a year of absence. It underperformed this year which allowed it to beat out MCD, GM, TLGD, BKR & BOSA to make the list. Growth will be less than historical, but it's still got tons of cash and earns at least a respectable return. Target: $50.

6) NTBK: Showing very good profitability and compares well on a p/b ratio with other banks & S&Ls. Perhaps an over-reliance on mortgage income. Target: $25.

7) WM: A repeat from last year. Valuations are still attractive by most any measure, despite a nice increase this year. Went down in December based on change in guidance. They increase the dividend every quarter and the yield is attractive. Target: $65.

8) MRK: Priced attractively based on p/b and p/e compared with historical and rest of industry. Good dividend yield. Moves up from last year as it underperformed. Everyone seems to be concerned about the pipeline, but I think they'll be okay. Target: $75.

9) BIIB: Biogen-Idec formed in essentially a merger of equals. This is new to the list, but not new to me, as I've been a Biogen shareholder for a few years. Target: $60.

10) GM: I'm less comfortable with GM after the tumble in book value and pension obligation problems. GM continues to show good earnings, and looks good by some measures, but it drops to the number 10 spot. Target: $70.


Stocks that were replaced on the list (I still hold positions in all of these):

BOSA: I've been pretty patient with BOSA, but don't know when we might see earnings improvement again. Drops off the top ten list at least until they can show earnings improvement, though I do continue to hold BOSA.

DIS: Disney had a pretty good year and falls off the bottom of my list. Fundamentals don't look nearly as attractive as they did, but could still move up a bit from here before I'm ready to sell.

BKR: Baker had some mis-steps this year which cost it in earnings. I think they are just temporary in nature and they should see a return to $1+ earnings. Still it was enough to drop it off the list and reduce my target.

MCD: McDonalds seems to be getting back close to fair value now, so it drops off my list.

TLGD: Tollgrade had a good year (at least in stock price appreciation) and drops off the list.
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