Using our fiscal year 2009 earnings estimate of $7.05 per share, and a forward multiple of 15x, discounted at 20% for one year, we arrive at our price target of $90. The P/E ratio of 15 is between big pharma industry P/E of 18.6 and chemical industry P/E of 13.6. We choose this hybrid P/E because Bay operates in these two industries and each segment accounts for about 50% of its total revenue.

Corp. Executive Board Overvalued

We maintain our Sell rating on Corporate Executive Board Co. (EXBD) before the release of second-quarter results on July 23. Given the current operating pressures, along with ongoing concerns regarding a slowing economy, we believe the shares should trade at a discount to the peer group average. We anticipate that the stock will underperform the market in the near term.

The current outlook for 2008 remains challenging, and we have identified several concerns within the company's current operating statistics. On its year-end conference call, the management indicated that the current corporate budgeting environment in the U.S. is proving to be a hindrance in driving new revenue.

Although we see the potential for substantial growth in the company's new initiatives to serve middle-market customers, expansion into new markets does have its drawbacks. Of primary concern is the amount of pricing discounts the company will have to offer to attract middle market customers, which typically have much smaller budgets than Fortune 500 companies.

The price/value trade off is much more of a factor in decision making for middle-market executives. As such, pricing will be a key component in the company's ability to penetrate the middle market and build scale of operations. Lower pricing to middle-market customers could also create backlash among existing customers, who may perceive that they are getting a similar product at a much higher price.

We believe the shares of Corporate Executive Board are overvalued near current levels and set our target price at $36, which equates to roughly 17x our 2008 EPS estimate.

Starwood Hotels Remains HOT

We maintain our Buy rating for Starwood Hotels & Resorts (HOT). We consider the company's significant exposure to international markets and concentration in higher-end hotels to be a positive attributes that should help Starwood to weather the economic downturn in the U.S.

Starwood has a pipeline of 500 hotels with approximately 120,000 rooms. This pipeline represents growth of more than 40 percent over the company's current system-wide total, the largest such percentage in the industry.