My Yahoo!Page 3 of 6 from Top Gurus' Best Bets
04.10.02, 12:00 PM ET
Vahan Janjigian
Editor
Forbes Special Situation Survey
Forbes Growth Investor
Kohl's (nyse: KSS - news - people )
With almost $7.5 billion in annual sales, this retailer is on track to be the next Wal-Mart (nyse: WMT - news - people ). It specializes in selling reasonably priced, high-quality, national brand-name merchandise, including apparel, shoes and bedding. Kohl's now has 382 stores in operation throughout the U.S., and the company is expanding quickly, opening 62 new stores in the past year alone. Total revenue is growing 20% annually. More important, same-store sales are up more than 10%, and earnings have been rising 30%. However, Kohl's is not an undiscovered stock. Since Sept. 11, the stock has advanced from around $45 to a recent price of $70 per share, and it is selling for about 40 times expected earnings. In this case I believe you get what you pay for. With consumer spending remaining strong and an economy rising from recession, Kohl's should continue to ring up generous returns for stockholders. Target Price: $80.
Honeywell (nyse: HON - news - people )
I initially recommended Honeywell in August 2000. Soon after, General Electric (nyse: GE - news - people ) targeted the company for acquisition. We advised subscribers to take a 52% gain. A few months later the merger failed to win regulatory approval, and Honeywell's stock price sank. It remains depressed due to its heavy exposure to the commercial aerospace industry, which has suffered considerably since the Sept. 11 terrorist attacks. But Honeywell is very diversified. It also makes control technologies (think thermostats), automotive products and specialty chemicals. I believe the stock is a strong buy once again. New management is focused on cutting costs. Honeywell should surge once air travel returns to pre-attack levels. And another acquisition attempt wouldn't surprise us. In the meantime, investors can buy the stock for only 16 times expected earnings and pocket 2% a year in dividends. Target price: $50.
Hewlett-Packard (nyse: HWP - news - people )
The family feud rages on, and if Carly Fiorina is successful in buying Compaq Computer (nyse: CPQ - news - people ), she must prove that it was all worth it. Her team promised that the new HP-Compaq would create savings of about $2.5 billion a year. But judging by HP's sagging price, investors remain unconvinced. I believe that now is the time to get into HP. The company will eventually move away from low-margin PCs and focus on more profitable businesses such as printers and IT services. Buy HP now. This stock should climb to $25.
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