Maintain a conservative accumulation strategy. (page 1 of 3)

US Stocks
Apple Computer Inc. (AAPL $24.41) - the stock has out-performed the S&P500 Computer Hardware Index since the beginning of the year (+4.76% vs. -7.71%). Its new Mac OS X operating system has been handling business tasks since the arrival of Microsoft's Office version X for Mac in last November.

Recently, several video and audio programs have come to the market, which is playing to Apple's strengths in video editing, and music & audio production. This should be positive for its sales, particularly among the TV, music, and film studios. The company continues to recover from the disastrous introduction of Cube a year ago, and is concentrating on re-capturing the educational market. Our target price is $28, which has another 14% upside. The stock remains a Buy.

On the contrary, Waste Management (WMI $25.13) took a beating last Friday, management trimmed 4Q profit estimates. The company will report 4Q results on Feb-26-02, IBES est. $0.315 vs. $$0.060 y-o-y. The reason for the shortfall is that the previous estimate included a pretax gain of 7 cents for insurance settlements. Excluding the non-recurring gains, the EPS will be lower to $0.245. With the specter of Enron hanging over the market, the stock price dropped 13% with volume 10x more than the 3-month average.

Moody's has also reduced its outlook on WMI from positive to negative (Ba2), but S&P maintains its BBB rating. WMI has just emerged from a 3-yr probe on the company's accounting irregularities, and is unlikely that the new management will risk another federal investigation. The problem is that margins are still under pressure because management is slow to cut costs. Current price levels already assuming its operating cash flow will drop by 25%. Accumulate on weakness. Lower stop-loss to $22 and target to $34.

Next up is Celera Genomics; its 2Q losses are larger than expected (including acquisition expense). The company is making a transition from the database business to drug discovery stage. This year will be a year of consolidation, where CRA will focus on building its internal capabilities, projects like proteomics (study of proteins), and integrating the acquisition (drug discovery). New products are not expected until 2003/2004, and profitability in 2005/2006. Is a long term Buy. Lowering stop-loss to $19.00.

Schlumberger (SLB $55.20) has gained 20% since recommendation at $45.65, is about 3% from our target of $57, suggest client to reduce holding to take partial profit.

Recommend taking profit on Hospitality Property Trust (HPT $30.15), Park Place Entertainment (PPE $9.73) & Public Storage (PSA 6.98) for a profit of 18%, 17% & 10% respectively.


Worthington Industries (WOR $14.80) stock price near our target of $15, take profit - the gain will be 18%.

Putting American Int'l Group (AIG $73.25), JP Morgan Chase (JPM $ 32.16), and Applied Biosystems Group (ABI $23.72) on the buy list. Earning concerns have put pressure on AIG's stock price recently; do not see any fundamental problems. Company reporting 4Q on Thursday (Feb-7-02), consensus is looking for $0.784 per share. Moving forward, firmer rates should enhance revenue growth.

The stock price of JPM has fallen to the low end of our buy range of $32 to $35; we are putting the stock on our buy list. As of Dec'01, JPM's non-performing assets to total assets is only 0.87%, way below the industry threshold of 2%. Furthermore, commercial loans only account for 10% of JPM earnings these days.

Applied Biosystems Group was recommended back in October 01 at $27.00 and took profit at $33.00.