EnCana also expects to generate an estimated $500 million from divestitures in 2008. EnCana plans to continue returning free cash flow to shareholders through an ongoing program of dividend increases and share purchases. Recently, the company doubled its quarterly dividend to $0.40 per share.

Linear Tech Near Fair Value

Linear Technology Corporation (LLTC) is a leading OEM of analog and mixed signal semiconductors. March quarter revenue was in-line with consensus expectations, although the EPS exceeded. Forward guidance is for a 1-5% revenue growth in the current quarter.

We believe that the company has strong fundamentals. Linear generates strong cash flow, which enables management to expand its R&D capabilities and return cash to shareholders in the form of share repurchases and dividends. The management recently leveraged the balance sheet, which had a positive impact on the EPS. We are reiterating our Hold rating on LLTC shares.

The shares are currently trading at a 17.3x multiple of our 2008 earnings estimate (P/E). Linear Technology has an attractive business model that features some of the most favorable margins within the technology sector. The company grew sales 30% during a semiconductor down-cycle in 2005, and 4% in fiscal year 2006. Growth tapered off in fiscal 2007, as management continued to pursue only those business lines that afforded gross margins at the level historically enjoyed by the company. As a result, cash flow has been very consistent.

Linear has around $908 million in cash and short-term investments ($4.09 a share). The management continues to pay a dividend, and recently raised the amount to $0.21 per share. Historically, the company has done extremely well during economic downturns; therefore the stock should continue to do well as the cycle dips. We view LLTC as one of the lowest-risk stocks in the technology sector. We are setting a target price of $35.00 (18.5x P/E).

Cosi Looking for the Right Fit

After uncontrolled growth led to two years of sub-par profitability, Cosi Inc. (COSI) is making significant strides in its plan to return to profitability. The company has shed unprofitable locations, scaled back company-owned unit expansion, contained food and labor costs and shrank its outsized G&A (gross and administrative costs).

Comps are resuscitating, albeit off weak comparisons, and restaurant cash flow margins are improving, a trend we expect to continue near-term. However, in our opinion, the company's biggest problem has been its history of poor site selection, an issue that a newly hired seasoned development officer may remedy but not in time for 25-35 new franchise unit openings in 2008, potentially stifling further improvement.

While the chain's numerous issues are resolved, Cosi is slowing growth slightly, with plans to open fewer company-owned restaurants in 2008. The management acknowledged that in trying to satisfy Wall Street expectations for unit openings, it opened units, which it should not have, without having maintained adequate operational controls.

Another challenge will be rightsizing G&A. A longer-standing issue is the company's heavy corporate overhead. Although Cosi has scaled overhead, the low-hanging fruit may be gone and its G&A is still twice the industry average. We recommend waiting for evidence of a sustained improvement in comps and margins before buying the shares.