Focus in Europe on a combination of economic sensitivity (cyclicals) and reliable growth (pharma). (page 1 of 3)

US Stocks

International Business Machines Corp. (IBM, $102.89, CSFB rating: hold) - the stock has lost approximately 15% this year (from $121.50 to $102.89) partly because 4Q results were lower than forecasted. Nevertheless we remain positive on the stock with a 12-months target price at $122.00. We see IBM's stocks being attractive below $100 as a core holding. With an expected US economy recovery for the second half 2002, original equipment manufacturer's business should perform better. In addition, the company should begin to reduce excess capacity or to find a more efficient way to use it. Besides services and microelectronics, IBM is well positioned to gain market shares in other areas like middleware platforms, in unix servers and in storage.

Boeing Co. (BA, $44.90, CSFB rating: strong buy) remains one of our favourite buy (accumulate below $40.00). In spite of lower aircraft delivery projections and doubts in development in space and communications business in the near future, the stock is recovering nicely back to its level before September 11th 2001. President George W. Bush has called for higher defence spending, which could be positive for the company. Besides the company keeps a strong operational and financial control. 12-months target price $50.00.

Microsoft Corp. (MSFT, $60.23, CSFB rating: strong buy): the company continues to execute effectively in a tough economic and tech-spending environment. In addition, Microsoft Corp. continues to benefit from new licensing initiatives and effective price increases to outpace the PC industry. In the downside, Microsoft's management has lowered its forecasts and reiterated its uncertainty about the economy. Nevertheless we consider Microsoft Corp.'s stock attractive below $60.00 with a 12-month target at $88.00.

American Financial Group Inc. (AFG, $26.62, CSFB rating: strong buy) is a profitable underwriter positioned to benefit from higher property-casualty insurance pricing. Besides the company is well positioned to benefit from the seller's market that has emerged in California worker's compensation. We think that below $25.00, the stock is at an attractive level. 12-months target $35.00.

Consumer price index for January will be announced on February 20th. 0.2% change is expected after a previous change of -0.2% for December 01. On Feb. 21st US trade balance for December 01 is expected to come out with a deficit of $28.40B vs. -27.9B for November 01. On the same day, the budget statement for January will be made public. We expect $40B vs. $76.4B for December 01.


US Technology

After rising steadily during the week the NASDAQ Composite lost all the gains on Friday, after new fears of accounting concerns surfaced again. Nvidia Corp (NVDA, $57.35, CSFB rating: Buy) came under SEC investigations for reserves and product costs accounting issues while IBM (IBM, $102.89, CSFB rating: Hold) was accused of not having fully disclosed the sale of its connector business. IBM disclosed the spin-off transaction as revenue from intellectual property (which is acceptable within accounting standards) instead of an extraordinary item. This case will probably rise more questions about current accounting standards as investors seek more transparency so as to accurately determine (as best as possible) a company's financial health.

Sentiment within the technology sector remains nervous as bad news continues to flow in (shading the hopes of a recovery in the near-term).