End-of-Year Stock Ideas From Lazard

With the holiday season in full swing, brokerages and investment banks are busy trotting out their holiday shopping lists. This slate of timely investing ideas -- including five "buy" recommendations and one "sell" advisory -- is courtesy of Lazard Capital Markets:

Aladdin Knowledge Systems (ALDN). Lazard analyst Joel Fishbein thinks shares of this Israeli security software maker are worth $22, a 24% premium to the stock's December 8 close of $17.72 (all prices in this story are as of that date). The company, which makes products that protect against spam, viruses and the unauthorized use of software, is "well positioned to maintain leadership in this growing market," Fishbein writes. He also thinks the company's eSafe software (an anti-virus product for cell phone makers) could boost Aladdin's expansion in the security-software market and spark earnings acceleration in 2007. Aladdin's stock sells for 16 times analysts' average 2007 earnings estimates of $1.14 per share, according to Thomson First Call. Analysts see earnings growing 15% a year over the next three to five years.

Deckers Outdoor (DECK). This Goleta, Cal., shoe maker is the parent of several popular brands, including Teva sport sandals and UGG sheepskin boots and footwear. Over the past five years, Decker's revenues have grown 18% a year, on average, thanks largely to robust sales of the high-end UGGs. The company expects to earn $2.75 to $2.78 a share in 2006, an increase of 11% to 12% from the previous year's profits of $2.48 per share. Deckers is readying a revamped line of its Teva footwear for a spring 2007 launch, and the company's casual-shoe brand, Simple, recently debuted a new line of footwear called Green Toe. Lazard analyst Todd Slater thinks the Green Toe shoes, made with all-natural materials, will drive future sales growth. At $57.56, Deckers' stock sells at 19 times analysts' estimated 2007 profits of $3.07 per share. Slater's 12-month price target: $63.

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Genco Shipping Trading (GSTL). Strong growth in China and India means more business for companies that ship building materials. One beneficiary of this trend is Genco, an oceanic transporter of dry-bulk cargoes, including coal, grain, iron ore and steel products. The first and last quarters of the year usually generate the most business for Genco, and the company's latest contract renewals indicate that the first half of 2007 will be even stronger. During the first nine months of 2006, the New York-based company earned $47 million, up 21% from the same period in 2005. Revenues increased 17% during that time.

Genco is also expanding its fleet. The company recently bought three second-hand vessels, which brings its total flotilla to 20 ships. At $27.47, Genco's stock, which yields a generous 9.8%, sells at ten times the $2.72 per share that analysts expect the company to earn in 2007. Lazard analyst Urs Dur thinks the stock could rise to $31 within the next 12 months.

NutriSystem (NTRI). For many of us, the holidays mean the inevitable battle of the bulge. But the holidays can also mean hefty profits for companies that help gluttons take off pounds. One such company is NutriSystem, which offers portion-controlled meals as well as telephone and online counseling. For the three months that ended September 30, the Horsham, Pa., company posted earnings of $23.4 million, more than three times its profit in the same quarter of 2005. During that period, revenues more than doubled, from $64.5 million to $155.3 million.

In an industry that caters to women, NutriSystem has made strides recently recruiting male customers. Undoubtedly helped by pitchman Dan Marino, a Hall of Fame quarterback, NutriSystem saw a big jump in male users in the third quarter, with men accounting for 30% of new customers. Lazard analyst Colin Sebastian thinks NutriSystem has several channels for future growth, including the launch of a program aimed at seniors and expansion into international markets. At $73.51, NutriSystem's stock sells at 24 times analysts' 2007 estimates of $3.10 per share. Sebastian thinks the stock is worth $84.

Zebra Technologies (ZBRA). You may not realize it, but Zebra Technologies is probably an integral part of you holiday shopping. That's because the company makes specialty printers, which are used to print bar codes and receipts, among other things. In the first nine months of 2006, the company's revenues reached $550 million, up 5% from the same period in 2005. Earnings fell 36% during that period, largely because of a $64 million payment to settle a licensing dispute with competitor Paxar Americas. Lazard analyst Christin Armacost thinks the company's upcoming product launches and expansion in China and Europe will ramp up earnings growth in 2007. Shares of the Vernon Hills, Ill., company, which closed at $35.26, sell for 20 times analysts' 2007 estimates of $1.76 per share. Armacost thinks Zebra's stock is worth $43.

One to dump

Intermec (IN). Lazard advises investors to sell Intermec, a competitor of Zebra Technologies. The Everett, Wash., company recently announced plans to streamline its business and cut costs, starting with a 9% reduction in its workforce. Lazard analyst Armacost believes these lay-offs will disrupt business in early 2007 and says that analysts' consensus revenue-growth estimates of 9% in 2007 are "too aggressive." At $23.62, the stock sells for 30 times analysts' 2007 estimates of 78 cents a share.