Time to sell Placer Dome Inc

US equities

After a 32% increase in share price since our recommendation on March 17, we did recommend to sell the gold mining stock Placer Dome Inc (PDG, $12.15, CSFB: Outperform).

We remain positive on gold and we are looking to buy back Placer Dome at lower levels. Our 12-month target price of $17, based on our $425/450 price target for gold. Our rating on Newmont Mining (NEM, $33.60, CSFB: Neutral) remains unchanged with a buy, as the stock offers a good proxy for gold, thanks to its sensitivity to the gold price.

We did also take partial profits in Qualcomm Inc. (QCOM, $36.45, CSFB: Neutral), as the stock did hit our short-term trading target of $38 intraday, yielding a 14% profit. However, still looking for a $42 12-months price target for the stock.

We are increasingly comfortable with our view on Qualcomm. As the reason for the rally in the stock last week was an announcement by one of its major customers China Unicom, that it will extend its prepaid phone card services for its CDMA telephony services, after it has completed a successful trial.

In a first phase it will offer the service to Beijing, and later expand the service nationwide. China Unicom is short of its full year target for new CDMA subscriber and is aggressively marketing this service, which is based on Qualcomm technology. Qualcomm share price has suffered from the slow subscriber growth of China Unicom, but this could change, if the aggressive marketing campaign bears fruit.

It could not only improve sentiment towards Qualcomm, but would also mean that the analyst estimates for Qualcomm's revenue growth could prove too conservative at this point and would have to be revised upwards. We reiterate our buy recommendation on Qualcomm and would accumulate on weakness at levels around $35.50.

Drug maker Pfizer Inc. (PFE, $35.57, CSFB: Outperform) and Aventis SA (AVE_FP, EUR51.60, CSFB: Outperform) inhaled insulin, Exubera, shows efficacy in the treatment of Type 2 diabetes, according to a phase 3 results on the drug, conducted by their developing partner Nektar Therapeutics.

Pfizer and Aventis expect to grab a significant market share in the diabetes market, which grows by 16% a year and makes up for approximately 10% of health-care spending in the US, with replacing the current treatment with painful shots, by an easy to use inhaled version of insulin.

Pfizer will be filing for FDA approval, to be ahead of a similar product in development by Aradigm Corp. and Novo Nordisk A/S. The drug could be on the US market by late 2004, early 2005, after having been delayed for risk of pulmonary fibrosis, a problem that has been solved.

The company also said that next year's earnings and sales would exceed analyst's estimates. Pfizer's CFO forecasts a fiscal 2004 EPS of about $2.13, compared to an average analyst estimate of $2.06 a share.

Last Tuesday the stock traded as close as 8 cents away from our 12 months price target of $37 and rose 18.6% since our recommendation on January 22nd. In order to protect our profits, we are raising our stop-loss limit to $33 form the previous $27. We would like to advise investors holding the stock to consider partially locking in profit.

Finally we have posted a new Investment idea on Johnson & Johnson (JNJ, $54.45, CSFB: Not rated) as a core holding, in order to reinvest the profits from the above recommendations.

We believe Johnson & Johnson offers attractive valuation/growth prospects, as the healthcare and medical technology sector offer defensive growth potential. After the recent rally in technology stocks, defensive plays with attractive valuations could come into favour, as investors will seek good value.

Johnson & Johnson is a diversified health care company. Its sales breakdown is of 45% in pharma, medical devices and diagnostics account for 34% and consumer products for 21%. In terms of profits the pharma is the most profitable, with a 62% share, while medical devices and diagnostics contribute 25% and consumer care 13% of the profits.

Despite its immense size the company continues to generate robust earnings growth. Over the last 10 years it grew by about 13% per annum. While helped by an expanding health care market place, its outstanding success also reflects proficient management, which directed the company's growth through well-planned, strategic acquisitions, aggressive R&D spending, and a policy of decentralized management.

Over the past 10 years, many of the acquisitions have become important sources of growth. R&D spending totalled $3.6 billion in 2001, equal to 10.9% of sales. The stock trades at 20.87x forward earnings and 1.7% price to sales, which is a result of the consistency in the company's revenue and profit growth.

Harley Davidson Inc. (HDI, $41.90, CSFB: Neutral) shares declined after the Motorcycle Industry Council's May US retail registration figures release last Tuesday. Registrations fell an estimated 6.3% and are an indicator of sales. The drop in Harley Davidson share price offers a good buying opportunity, as the company earlier said that it has seen a strong rebound in sales since the beginning of the second quarter, after having had a weak first quarter.

Monthly figures are less reliable than quarterly figures, as they tend to be more volatile. Therefore taking Harley Davidson's mid-quarter update, we believe that the share price decline resulting from the industry council's announcement is unwarranted and the stock should see a rebound from current price levels.

We reiterate our Buy recommendation on Harley Davidson, as we expect the company also to benefit from 2003 being the year of its 100th anniversary. The company's motorbikes make up for about half of the motorcycles with 650cc engines or larger in the US, and one in four worldwide. We welcome the positive development of the company's sales figures.


European equities

Italy's ENI SpA (ENI, EUR14.284, CSFB: Outperform) could become the first European oil producer to develop Russian oil and natural gas, according to the company CEO. ENI and the Russian company Gazprom signed a strategic alliance back in 1998, which has already led to joint projects, like a $3.3 billion gas pipeline under the black sea to Turkey.

Russia is one of the top three gas suppliers to Italy and talks between Italy's Prime Minister Silvio Berlusconi and Russian President Vladimir Putin about a possible increase in gas purchases out of Italy could help the state controlled ENI win business in Russia, Europe's largest natural gas supplier. This would also help ENI to expand further in Europe and become less dependent on its domestic market.

DaimlerChrysler AG (DCX_GR, EUR 29.80, CSFB: Outperform), according to the report of an independent research firm Harbour and Associates, comparing the US automobile manufacturing industry, saw a significant improvement in its manufacturing efficiency by 8.3% in 2002 compared to 2001.

According to the report it seems that DaimlerChrysler is starting to see some success in its effort to implement its high European production standards in its US Chrysler division, and should be able to turn this unit around eventually.

DaimlerChrysler still has a bumpy road ahead, but the apparent improvements and the continuous efforts in its US car division, give some confidence in the stock, which we see as an attractive long-term recovery play.

The weakening Swiss Franc over the last two weeks has led to a rally in the Nestle SA (NESN_VX, CHF 264, CSFB: Neutral) share price. The company's profits, with its worldwide operations and sales, suffer from a strong Swiss Franc, when revenues from abroad are translated into the company's reporting currency. In line with the IC forecast that the Swiss Franc could see a decline from current levels, further upside in Nestle's share price would be possible.

Hence we reiterate our Buy rating on the stock, as it is well positioned in some key markets and its aggressive growth strategy will continue to benefit shareholders. Currently Nestle is in the process of acquiring Dreyer's ice cream and after last year's acquisition of Chef America, the company is positioning itself in the fast growing frozen food market. We believe that a successful closure of the deal could give the stock a boost.