EMC Now $17 Per Share: Will It Return To The Year 2000 Price Of $102? Large Cap Growth Stocks Due For A Reversion To Their Previous Bull Market Multiples According To Premier Asset Management

• On 9:17 am EDT, Thursday October 8, 2009

67 WALL STREET, New York - October 8, 2009 - The Wall Street Transcript has just published its TWST Large Cap Growth Report report offering a timely review of the sector to serious investors and industry executives. This 43 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Recovering Economy -- Domestic and Global Recovery -- Increasing Dividend -- Relative Opportunity and Opportunity Cost -- Downside Protection -- Bullish on Growth -- Valuations -- Effects of Healthcare Reform -- Development of New Products -- Innovation -- Growing Earnings -- Acquisitions -- Technologies -- Quality Control -- Equity Research Capabilities -- Sustainability and Predictability of Earnings Growth -- Source of Earnings -- Canadian Banking -- Dividend Cuts -- Discretionary Stocks -- High Volatility -- Concentrated Portfolios -- Undervalued Stocks -- Demand for Steel -- Increasing Production -- Growth -- Coal Mining Operations -- Surge in Consumer Spending -- Increase in Viewership -- Unit Volume -- Foreign Income -- Tax Rate

Companies include: Schlumberger (SLB); ConocoPhillips (COP); Emerson Electric (EMR); Morgan Stanley (MS); Qualcomm (QCOM); Genzyme (GENZ); Colgate-Palmolive (CL); National Oilwell Varco (NOV); Myriad Genetics (MYGN); Nuance Communications (NUAN); Apple (AAPL); BHP Billiton (BHP); Changyou (CYOU); EMC (EMC); Intel (INTC); Dell (DELL); Wal-Mart (WMT); Gilead Sciences (GILD); Express Scripts (ESRX); Visa (V); Ross Stores (ROST); Amazon (AMZN); Monsanto (MON); Google (GOOG); Priceline (PCLN); United States Steel (X); Las Vegas Sands (LVS); INVESCO (IVZ); Noble (NBL); Cameron International (CAM); Peabody Energy (BTU); Medtronic (MDT); AutoZone (AZO); Sysco (SYY); The Gap (GPS); Lowes (LOW); CVS Caremark (CVS); Amgen (AMGN); Baxter International (BAX); Discovery Communications (DISCA); Time Warner (TWX); JCPenney (JCP); Kohls (KSS); Guess? (GES)

In the following brief excerpt from just one of the interviews in the 43 page report, Large Cap Growth money managers discuss the outlook for the sector and for investors.

Joseph T. Seminetta is President of Premier Asset Management LLC. Previously, he was a Portfolio Manager with The Northern Trust Company, ABN AMRO and the Harris Trust Company. He is currently a Board Trustee and investment committee member of Columbia College and Catholic Charities of Chicago. He is also a member of the Economic Club of Chicago and serves on the reception committee. He received an MBA degree in Finance from the J.L. Kellogg Graduate School of Management at Northwestern University and a BA degree in Finance from Loyola University of Chicago.

Denise M. Seminetta, CFA, is the Director of Research of Premier Asset Management LLC. Previously, she was a member of the investment teams with ABN AMRO and its predecessor firm The Chicago Trust Company. She is a member of the CFA Institute and CFA Chicago. She is a Board member of the Providence St. Mel School in Chicago. She received a Bachelor of Science/Bachelor of Art degree in Finance and International Business from The Ohio State University.

TWST: What are the criteria that you are looking for in potential quality growth stocks?

Ms. Seminetta: Generally speaking, our criteria for buying stocks are companies that have above-average earnings and revenue growth, high return on equity, low debt, and a billion dollar or higher market capitalization. In light of the statistics that Joe mentioned, we are looking at three particular types of growth stocks. The first are companies with dominant global franchises that did not participate in the last bull market. Large cap technology names are an excellent example of this. EMC is a clear leader in the networked storage market, which is growing 8% a year. It's really being driven by the need to back up or save everything from digital photos to corporate records. The Internet is growing exponentially and the number of things that individuals and corporations want or need to save, whether it's just for fun or because of regulatory requirements, is growing at a significant pace.

EMC is also is a majority owner of Vmware (VMW), which is a leader in cloud computing and virtualization, two things that almost every company is looking at as a way to cut costs. The majority of companies are likely to be in a cost saving mode for quite a number of years as the economy faces numerous headwinds. Two other names that fit into this similar technology area are Dell (DELL) and Intel (INTC). Both companies are benefiting from strong product introductions, in particular netbook computers and handheld devices. We just went through a severe inventory correction, and now that the economy is stabilizing companies are starting to reorder, with a strong focus on these new products. These companies also both have very strong international sales, for Intel 85% of their sales are overseas, both have increased their guidance for the second half of this year and both have very strong cash positions. Intel has over $12 billion in cash and Dell is expected to generate nearly $3 billion in free cash in 2009. Again, these are three stocks that sat out the last bull market of 2003-2007, EMC traded at 102 in 2000 and today is around 15, Intel traded at 75 in 2000, today around 19, and Dell traded at 59 in 2000, today trading around 15. So we think there is opportunity for these companies to reemerge as their earnings growth reemerges.

A final stock in that area is Wal-Mart (WMT). Wal-Mart peaked in 1999 at $70 and is now working on a ten-year base. Often when companies emerge from these long multi-year bases, you have a significant period of out-performance. They have been growing earnings about 10% a year and we think they have the opportunity to increase that to 12% to 15%. The P/E is near an all-time low and international sales are rising, especially in China. WMT is a strong cash generator and focused on improving return on invested capital through better apparel offerings, better inventory controls and cost cutting.

A second focus is high quality companies that have lagged the rally in 2009. One example is Gilead Sciences (GILD). Gilead is dominant in the HIV franchise. Their products, TRUVADA and ATRIPLA are the two most prescribed drugs for HIV, each garnering 30% market share. TRUVADA is the Number 1 brand in all five of its European markets. Gilead has 11 products in late-stage development, with a particular focus on cardiovascular and Hepatitis. Here is another company that's trading near it's all-time low valuation with a P/E on forward earnings of 18 with the all-time low being 16 and the high being 40. We think there is a good opportunity for Gilead, a winner really no matter what happens with healthcare reform. Express Scripts (ESRX) is another winner regardless of what happens with healthcare reform as this pharmacy benefit manager gets nearly two-thirds of sales are from generic drugs. We expect earnings to accelerate into 2010 due to an acquisition from WellPoint which will give them opportunities with new customers as well as synergies. They have just re-signed their two biggest clients, so the risk of disappointment is very low.

In the technology area, we also like Qualcomm (QCOM). Qualcomm is an excellent pick-and-shovel play on the 3G to 4G migration, and the smartphone market. They have dominant market share in the CDMA technology and that makes them the top licenser of wireless technology. So QCOM benefits regardless of who is selling the most phones. Recent settlements of legal disputes with Nokia (NOK) and Broadcom (BRCM) will allow them to improve margins as legal expenses decrease. They are particularly exposed to growth opportunities in China and India. In 2010, China Telecom (CHA) will launch at least 15 million new units and China Unicom (CHU) will be launching 44 new phones including the iPhone. Our final pick in this high quality group that has lagged this year's rally is Visa (V). Visa has better than 20% earnings growth over the next couple of years and that's driven in large part by the increase in debit cards, both in the US and internationally. Cautious consumers are spending within their means using debit cards rather than credit cards. And Visa takes no credit risk, they are just the transaction processor, they earn a fee for each transaction they process. Again, valuation looks very attractive to us. The P/E of 20 times, which is one times their growth rate, is down from a high of 47. They have no debt and margins continue to expand as the company streamlines expenses as a public company (they were previously owned by the large banks). V has free cash greater than a billion dollars to continue investing and growing. The final area that we are looking at is both high quality and high growth stocks.

We put together a screen and I'll highlight seven companies that have double-digit earnings growth, return on equity greater than 20%, debt-to-capitalization less than 40% and they grew their earnings in 2007, they grew their earnings in 2008, they are growing their earnings in 2009 and they will have earnings growth in 2010. So despite the significant setbacks that the economy and majority of companies have experienced in the last 12 months, these companies are continuing to execute at a very high level. A few of them I've already mentioned, such as Wal-Mart, but in the consumer space we also really like Ross Stores (ROST). Ross Stores is a discount retailer, and in this slower growth environment the consumer is looking for better value. We have seen research that only 13% of consumers will go back to their previous spending habits from the 2006/2007 timeframe. We are looking for companies like Wal-Mart that can benefit from that. Ross Stores is smaller and they have had excellent opportunities to buy name brand merchandise at much more attractive prices. Their margins are strong as they reduce inventory costs by holding fewer items in-house at any one time, increase inventory turns , and lower real estate costs.

Another favorite is Amazon (AMZN). Amazon has three exciting drivers. The first is that they are becoming an online Wal-Mart. They are combining excellent choices for the customer with excellent technology. It's a terrific consumer experience with very good quality control, as most products they sell are not Amazon products, they are from different manufacturers. It's very challenging to control the external manufacturers' quality, but they have done a good job. We really like their recent acquisition of Zappos, which offers shoes and clothing with free overnight shipping. So this is significant improvement to the customer experience. The second driver is the Kindle e-reader. The Kindle is the first mover, has the best technology, is the easiest to use with the best front-end interface. This is the exact roadmap that Apple used to make the iPod a dominant product and no competitors were ever really able to catch up. We think the Kindle is following that same path. The third area is in cloud computing. Most people don't even realize Amazon is involved in cloud computing and it's small, but growing quickly. AMZN leases out their excess server capacity to other companies; ranging from start-ups all the way to large companies. For example, the New York Stock Exchange uses Amazon's cloud computing service to test out new products. This is a significant cost savings to companies because they don't need to invest in that extra hardware to do research and development for new product development.

In the global biotech area, we really like Gilead, which I have talked about, but also Monsanto (MON). Monsanto, we believe, is more than an agriculture company, it is a global biotechnology company. They are very focused on the long-term, investing more than a billion dollars a year into research and development. Their goal is to increase crop yields in corn, soy, and cotton by 3% to 4% a year. This is driven by increasing the seeds per acre through better plant health through reduced weeds and pests. They have a significant number of new products and over the next seven years we will see the benefits of their strong R&D pipeline. This will replace declining sales in Round Up, which investors are concerned about right now. So they will double yields by improving drought tolerance, improving root health, reducing the need for nitrogen(one of the most expensive inputs for farmers is fertilizer) and reducing the need for external pest control. In addition, Monsanto has about 50% of their sales outside the U.S.The final area is in technology.

Two stocks that meet the screen we put together are Google and Priceline (PCLN). Google will benefit from a recovery in the advertising market, particularly in Europe as search spending was lagging behind the US even before the downturn. So we expect to see a a few drivers propelling the stock; a cyclical upturn as well as expanding market share in Europe, focus on monetizing recent acquisitions, especially YouTube and DoubleClick, and the realization that Microsoft's (MSFT) Bing is really not a threat. Internationally we're really seeing no impact at all on Google's search dominance. In addition, next generation Google Apps, which have very attractive margins, will be a significant improvement over what's currently being offered. We expect to see those coming out in 2010. GOOG has a high ROE, no debt and is trading near the low end of it's historical valuation range. Finally, Priceline. Priceline also meets those criteria of no debt, very high ROE, strong earnings growth, and is trading near the low end of it's historical valuation range. Bookings for 2010 should be around $11 billion, and growing two to three times faster than competitors. International bookings provide two-thirds of profits and online travel is the biggest e-commerce industry. They have differentiated themsleves with the Name Your Own Price strategy and by focusing on online hotel reservations and deeply discounted travel. So with the rebound in the economy, we expect them to grow even faster as travel recovers.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 43 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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