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Barron's Summary (BWA, AMR, NDSN, WYNN, LVS, SFD, CSCO, DISH, MU)

 September 30, 2007 12:27 PM

Barron's cover story reveals 50 best hedge funds. Top 5 includes RAB Special Situations (3y cumulative avg return: 47,69%), The Children's Investment Fund (44.27%), Highland DCO Opportunity (43.98%), BTR Global Opportunity (43.42%) and SR Phoenicia (43.1%).

Interviewed portfolio manager likes NEM, GFI, IVN and GOLD. He believes that gold bubble lies ahead, sees gold at $1000/oz.

The shares of BorgWarner (BWA) now trade in line with the auto-parts group, but merit a premium based on strong patterns of revenue growth. Now around 90, they could hit 105 to 110 in the coming year, analysts say.

AMR (AMR) is trading for about 22, or six times estimated '08 earnings, down from a peak of 41. The stock could rise 50% in the next year, as investors recognize its assets.

Nordson's (NDSN) shares could climb more than 20% in the coming year, thanks in part to global diversification that cushions earnings from an economic downturn in the U.S.

"The Trader" column highlights WYNN and LVS, whose shares have soared about 89% from their late-Jun lows. At 134, LVS now trades at nearly 51x forward earnings and 110x what it earned over the past 12 mo's. Wynn shares are changing hands near 160, or 56x forward earnings. Seizing the opportunity, Wynn last week priced a public offering of 3.75m common shares at 158, raising an easy $600m for "general corporate purposes." The dizzying valuations reflect increasingly crowded bets on the hot Macau mkt. While new Macau properties add buzz, there are cultural and political risks, and the tilted risk-reward profile makes these stocks more of a gamble. Jefferies analyst Lawrence Klatzkin, for example, recently lowered his rating on Wynn from Buy to Hold b/c the stock "has gotten ahead of itself."

"The Trader" also discusses Smithfield Foods (SFD), saying that the odds are improving for the co. Consider what's happening in China: As the world's largest pork-consuming country celebrates the year of the pig, it ironically is suffering an acute pork shortage. A vicious outbreak of Blue Ear disease has infected 290K pigs and would wipe out 20% of the pig population. Pork prices have jumped 70% in the past yr. Vietnam and Myanmar also reported outbreaks of the disease. Into the fray comes Smithfield, which agreed in late August to supply 60m pounds of pork to a Chinese distributor. While the agreement is to supply pork through Dec'07, it could lead to additional purchases. For one thing, the Chinese pork shortage won't ease soon: It takes about 18mo's to rear a sow and produce piglets, and the govt's disease control and vaccinations will take time. Meanwhile, the govt is under mounting pressure to keep food inflation in check and stave off social unrest.

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