Valuation remains attractive in our opinion. Consequently, we are reiterating our Buy rating on NSM shares. NSM shares are currently trading at a 13.5x multiple of share price to our 2008 earnings estimate (P/E). National is highly exposed to the seasonal handsets business, which results in typical softness in the first quarter. While the industrial business usually increases in Q1, this is not such a significant portion of the company's business.

With orders and backlog declining in the last quarter, and the guidance of lower growth than in comparable quarters of prior periods, the near-term outlook does not appear to be bright. However, the company seems to be more than making up on the margin front, as profitability has shown very consistent improvement. We are reiterating our target price of $25, which corresponds to a 17x P/E (2008 earnings).

A Hold on Houston Wire & Cable

Houston Wire and Cable Company (HWCC) reported fourth quarter EPS of $0.32, below our estimate and the year-ago level of $0.39, due to lower gross margin and the increased public company expenses. However, sales continue to grow from HWCC's continuous penetration in its target markets in the utility, infrastructure, and industrial sectors.

For the full year 2008, management expects earnings in the range of $1.60 to $1.75 per share and sales growth to be between 5% and 10%. The full impact of the additional expenses from being a public company will be included in prior-year (2007) results and margins will be compared to more normalized historical levels.

Given its investment in expanding the sales force, the private label business, and the penetration of three key end-markets off a smaller sales base than its peers, we believe HWCC can grow faster than the industry. However, while HWCC remains focused on its long-term growth strategy, in the near-term we expect its sales growth rate to decelerate compared to the 2007 growth rate and company's long-term growth rate, given the current weakness in the U.S. economy. We recommend investors to Hold the stock.

At its current price of $16.52 per share, HWCC is trading at approximately 10x our 2008 EPS estimate of $1.65, which is at a discount to the industry median multiple and its peers. We expect the company to report a year-over-year rebound in 2008 EPS, helped by a sales increase, cost control efforts and share buybacks.

Given the current U.S. economic weakness, we expect sales growth during 2008 to decelerate relative to its 2007 growth rate and its long-term growth rate. Consequently, we do not expect a large expansion in P/E multiple at this time. At a forward P/E multiple of about 10.6x our 2008 EPS estimate, our price target is $17.50 per share.

Alexion Pharma with Some Risk

Alexion Pharmaceuticals (ALXN) develops novel antibody therapeutics targeting the severe disease states, including autoimmune and cardiovascular disorders, inflammation and cancer. Alexion is a one-drug biotech firm and is currently riding high on the performance of Soliris (eculizumab), a monoclonal antibody for the treatment of Paroxysmal Nocturnal Hemoglobinuria (PNH). In 2007, the company received FDA approval and European Commission's marketing approval for Soliris to treat all patients with PNH.

Approval of Soliris in Japan, which is expected to happen in 2009, should fuel future top-line growth. However, we believe that Alexion's future is tied to Soliris. Data presented from various clinical studies at the 2007 ASH meeting provided further evidence of the drug's efficacy and safety. Soliris demonstrated significant clinical improvement among all PNH patients, regardless of the severity of the disease.