STOCK WATCH


Four Stocks Dad Will Love

These companies are favorites among dads everywhere, and they don't look like bad additions to a portfolio, either.



Dad's big day is right around the corner. Hope you remembered to buy a gift for the guy who taught you how to fish, reminded you to invest some of your birthday money, and warned you to never split 10s in blackjack. Forget the lame neckties and gift certificates. Pop would want you to be more original. Here are four dad-themed stocks any father could love:

Costco Wholesale. What dad doesn't like to shop for discounted bling at Costco? The warehouse club retailer excels at selling home electronics, sporting goods and jewelry to its growing population of card-carrying members. The stock (symbol COST) isn't bad either. Costco is on track to generate 10% growth in earnings for the fiscal year ending in September. After years of talking about boosting profit margins on its merchandise, company executives are poised to cut costs and pass through the savings to the bottom line, says UBS analyst Neil Currie. Given its strong balance sheet and cash on hand, "Costco could be an attractive private equity play, and we think management feels vulnerable," he says.

Currie anticipates that the company will boost its stock-buyback program, among other shareholder-friendly measures. The shares closed June 14 at $56.09, up 0.59% on the day. They trade for 22 times the $2.55 per share that analysts expect the company to earn in fiscal 2007. Currie rates the stock a "buy" and thinks shares are worth $65.

Lowe's. Loads of do-it-yourself dads can be found trolling aisles of Lowe's on weekends. The housing slump has hit home-improvement retailers hard, but A.G. Edwards analyst Brian Postol thinks the correction is close to its bottom. "Lowe's continues to be a preferred retail choice for long-term investors wanting to play the next rebound in housing activity," he says.

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Smaller than Home Depot, Lowe's differentiates itself with better service and merchandise you can't find at other retailers. In a tough environment for selling home-improvement supplies, Lowe's has managed to take market share away from Home Depot, Postol says. Lowe's announced on May 25 that it plans to buy back $3 billion in stock and increase its dividend by 60%. The stock (LOW) closed at $31.55 on June 14, up 0.16%. It trades at 16 times the $1.99 per share that analysts expect the company to earn for the year ending next January. Postol estimates the stock is worth $42 and rates it a "buy."

Molson Coors. Many bottles of beers will clink in Father's Day toasts this weekend, and a growing number of them will be made by Molson Coors. The company, which is the product of the 2005 merger between Colorado-based Coors and Montreal-based Molson and is the world's fifth largest brewer, has revitalized its U.S. beer business through better marketing and stronger relationships with distributors.

The stock (TAP) is a "buy," says UBS analyst Kaumil Gajrawala. "While the company appears to have revived growth in the U.S., we believe the company is only at the beginning stages of a turnaround in the crucial Canada business," he says. Gajrawala thinks Molson Coors will improve its Canadian business by using the same techniques that worked in the U.S. The Canadian business accounts for roughly 60% of the company's profit, so gains there could have a significant impact on the bottom line. The stock, which closed at $91.93, down 1.21% for the day, trades at 18 times the $5.22 per share analysts expect the company to earn this year. Gajrawala thinks the stock is worth $102.

Polo Ralph Lauren. It may sound too hoity-toity for dad, but this clothing and luxury-goods maker's merchandise turns up everywhere from Neiman Marcus to TJ Maxx. It also runs its own retail shops. The company is expanding in Asia and Europe. It plans to buy out Impact 21, its largest Japanese licensee, and recently opened a flagship store in Toyko. Europe has plenty of room to run as well. "Just 50% of the U.S. product line is rolled out to the western European market with golf and home yet to be launched," says Bank of America analyst Robert Ohmes, who rates the stock a "buy."

The company's focus on high-end clothing and accessories and a rising overseas presence insulates it somewhat from a possible slowdown in U.S. growth. The stock (symbol RL) closed at $94.90, down 0.01%, and trades at 20 times the $4.81 per share analysts expect the company to earn for the year ending next March. Ohmes has a 12-month target price of $105.




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