December 2006
High Fliers
By Maggie Frank
Our panel of professional stock pickers predict which Tar Heel shares will be the top performers next year.
Progress Energy Inc.
Progress’ performance has lagged its peer group throughout the past year during a period of company restructuring but offers investors a dividend yield of more than 5%. The company has shifted from a diversified to regulated regional utility with core operations in North Carolina and Florida. With the market having digested the company’s phaseout of synthetic fuels and other business, the shares should benefit from reduced earnings volatility and reflect some expansion to its price-earnings multiple.
R.H. Donnelley Corp.
The company is the third-largest publisher of directories in the United States, with annual revenue of nearly $3 billion. Re- cent weak revenue trends have pushed the shares down for the last year, providing an excellent entry point for a steady cash-flow business trading at a 50% discount to peers. Its ongoing expansion into the online search market provides additional growth potential.
Targacept Inc.
The company is developing a new class of drugs to treat disorders of the central nervous system by targeting receptors in the brain. As an early-stage biotechnology company, it’s risky until the drug pipeline yields marketable products. However, with Targacept’s potentially first-in-class drug for cognitive disorders such as Alzheimer’s disease, an exclusive global licensing and research collaboration agreement with AstraZeneca in place and a strong management team, the company is poised to grow significantly.
Disclaimer
Specific companies mentioned were done so for illustrative purpose only. Individual portfolios may vary in their holdings over time and in relation to other portfolios. The opinions expressed are subject to change from time to time and do not constitute a recommendation to purchase or sell any security nor to engage in a particular investment strategy.