Stock Pros Take Another Stab at Picks
FLORIDA JOURNAL-WSJ

Halloween came early this year in a ghoulish third quarter.

The seven stocks selected by the region's analysts and money managers for The Wall Street Journal were buried alive in a broad market sell-off. On average, they plunged a stunning 40.5% compared with a 7.5% decline in Standard & Poor's 500-stock index through Monday. In this group, there were only laggards, with price drops ranging from 56% to 30%.

The bright side? It should be somewhat easier for the next round of picks to beat this performance.

Once again, regional stock pros have agreed to give it their best shot for the next three months. The selections from this quarter's seven stock pickers range from potential small-cap turnarounds to bigger, defensive plays. Here is a look:

Frank Jolley
President and Chief Investment Officer
Jolley Asset Management
Rocky Mount, N.C.


AVX isn't for the faint-hearted.

Like many technology companies, the Myrtle Beach, S.C., maker of electronic components has been stung by Asia. AVX recently warned that its fiscal second quarter, which ends today, will be below analysts' forecasts due to Asian economic woes and costs associated with related work-force reductions.

"Forget all that," advises Mr. Jolley , who cites AVX's strong cash flow, solid balance sheet and decent long-term prospects as reasons why the company's battered stock is worth a second look. The shares, at $14.813 as of Monday, are off 57% from their 52-week high of $34.50 last fall.

Mr. Jolley points out that AVX is moving aggressively to boost per-share earnings by buying back shares. Its board has authorized the repurchase of up to 2.2 million common shares, or about 10% of its publicly available float. (Roughly 75% of AVX's stock is held by Kyocera of Japan.) In recent months, AVX has acquired about 1.3 million of its shares.

The stock trades at 19 times analysts' consensus estimate for the fiscal year ending in March, according to First Call. While that may seem a tad high, it's a pittance compared with three years ago, when AVX traded in the mid-$20s and boasted a P/E ratio of more than 40.

Mark Bacurin
Analyst
J.C. Bradford, Nashville

ITC DeltaCom shareholders certainly have bragging rights.

This year, through Monday, shares in the West Point, Ga., telecommunications provider have more than doubled to $18 due to the sector's continued strength, as well as takeover speculation. Despite the run-up, Mr. Bacurin likes ITC for its solid management, focus on the fast-growing Southeast and lack of Asian exposure. "It's a pure domestic play," he says.

Still, the company's lack of earnings power may give some investors pause. Like most of its peers, ITC is posting losses as it spends lots of money expanding its fiber-optic network throughout the South.

But by one yardstick -- earnings before interest expense, income taxes, depreciation and amortization -- the company isn't doing too shabbily, says Mr. Bacurin. By 1999, he expects diluted per-share operating earnings to reach 55 cents, up from a projected 38 cents this year. "Next year," he says, "we start to see the benefits of the building they've done in 1998."


David Henwood
Chief Investment Officer
Raymond James & Associates
St. Petersburg

Carnival may offer protection from choppy seas.

Investors bailed out of the Miami cruise-ship operator's stock after a July fire aboard the Ecstasy vessel raised questions about the company's profit outlook. But fears that Carnival's growth streak had ended were unfounded, says Mr. Henwood, explaining that the incident hasn't crimped 1999 passenger bookings, which at the moment are brisk.

He predicts that Carnival, which operates under Carnival Cruise Lines and other names, will increase its per-share earnings by 19% a year during the next three years as the company continues filling its larger, spiffier vessels.

Also, the stock, at $31.563 as of Monday -- down 26% from its July high -- is attractively priced at 20 times his firm's fiscal 1999 earnings estimate. "We believe investors will continue to focus investments on attractive industries, dominant companies and situations with well-above-average earnings prospects, all of which are present in Carnival," says Mr. Henwood.

Marty LaPrade
Equity Partner
Sawgrass Asset Management
Jacksonville

Dycom Industries is a seeming oxymoron: a hardy small stock.

This year, through Monday, the shares have risen an impressive 55% to $33.50 on the strength of Dycom's earnings growth. "We like the idea that it has held up well in a very difficult market," says Mr. LaPrade.

He notes that while profit projections for many companies are being slashed, estimates for this Palm Beach Gardens provider of telecommunication-related services are on the rise. Recently, the fiscal 1999 consensus estimate for Dycom was raised 7% to $1.80 a diluted share, from $1.68, according to First Call.

Dycom, which is benefiting from occasional acquisitions and steady demand for such mundane but lucrative services as laying underground cable, is expected to post per-share earnings gains of about 20% annually during the next three years, according to First Call.

The stock is still relatively reasonable at 19 times analysts' consensus estimate for the fiscal year ending next July. Mr. LaPrade says that investors who might otherwise be turned off by little stocks will embrace Dycom for its earnings stability.

Robert Montague
Analyst
Morgan Keegan, Memphis

SCB Computer Technology, a Memphis provider of information-technology services, is starved for investor affection.

The stock has been jilted along with many other small caps. SCB, at $7.75 as of Monday, has fallen more than 45% from its April high of $14.75. "It has gotten killed on no change in outlook," says Mr. Montague.

SCB remains on track financially as the company broadens its customer base through acquisitions and focuses a bit more on the higher-margin consulting and outsourcing areas. The company's traditional business, staffing, is also doing fine as governments increase their demand for technical workers.

Further, the company recently said it has tentatively settled a widely publicized billing dispute related to earlier consulting work performed for the Tennessee Valley Authority, the regional power giant. In SCB's fiscal first quarter ended July 31, the company established a reserve of about $1.9 million, or six cents a share, for the anticipated settlement.

Meanwhile, SCB trades at 18 times analysts' consensus estimate for the fiscal year ending in April, according to First Call. That isn't too steep, says Mr. Montague, for a company that during the next three years, is expected to increase per-share earnings by 25% to 30% annually.

John Moore Jr.
Analyst
Interstate/Johnson Lane, Charlotte

NationsBank's stock -- and that of its future incarnation -- deserves some respect.

Today, the Charlotte banking company is scheduled to complete its $45 billion merger with BankAmerica in San Francisco, creating a franchise that spans the nation. (The combined organizations will be called BankAmerica and will be based in Charlotte.)

But lately, NationsBank investors have been heading for the exits due to overall market jitters and fears about BankAmerica's exposure to weakening emerging markets. NationsBank's stock, at $57.063 as of Monday, has fallen 35% from its 52-week high of $88.438 in July.

"The market is really sort of missing the potential of this company," says Mr. Moore, explaining that while it's important to monitor the combined entity's international risk, the behemoth will largely be a domestic play. The newly formed bank boasts such a vast U.S. presence that it's hard to ignore as an investment, he says.

Best of all, he says, NationsBank's shares trade at just slightly more than 10 times his 1999 earnings estimate for the combined entity, and the new company should be similarly valued, compared with a P/E of about 15 for the industry.

Gary Tapp
Quantitative Analyst
Robinson-Humphrey, Atlanta

SCI Systems requires a strong stomach.

The electronics manufacturer has warned that the first half of its fiscal year, which ends next June, will be less than stellar due to, among other issues, fallout from Asia. Investors appear to be heeding the alarms. As of Monday, the Huntsville, Ala., company's shares had dropped more than one-third for the year, to $28.563.

Yet Mr. Tapp argues that this is just the time to buy SCI's stock, while it's out of favor. "We think we're closer to an upturn than any further weakness," he says.

He expects the company's profits to perk up by its fiscal third quarter, ending in March, when his firm predicts that SCI will earn 59 cents a diluted share, up from 50 cents a share in the year-earlier period. Beyond that, over the next three years, analysts project per-share earnings growth of about 20%.

Meanwhile, the stock is relatively cheap, at 13 times his firm's 1999 estimate. In fact, SCI is looking so good that last week, Robinson-Humphrey raised its rating on the stock to a short-term "buy" from a "market performer." (The long-term rating is unchanged, at a long-term "buy.") Says Mr. Tapp: "This is an earnings-turnaround story."

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How the Third-Quarter Picks Did
                                           Monday   Pct.
Stock Picker/Firm    Stock   (Symbol)      Close  Change*
Timothy McIntosh   Tupperware (TUP)        $12.25   -56.4%
Strategic Investment Partners
Gary Tapp          Interface  (IFSIA)      11.125  -44.9
Robinson-Humphrey
David Henwood        ABR      (ABRX)       14.00   -41.1
Raymond James   InformationServices
& Associates
Peter Vozzo        Personnel  (PGA)        11.938  -40.3
Interstate         Group of America
/Johnson Lane
Michael Hughes     Correctional(CSCQ)       9.625  -36.1
J.C. Bradford      Services
Jack Ablin         Outback Steak-(OSSI)    25.313  -35.1
Colonial Asset     house
Management
David Guthrie      U.S. Xpress   (XPRSA)   11.75   -29.9
Morgan Keegan      Enterprises

Average Change of Picks: -40.5% Decline in S&P 500-Stock
Index: -7.5%
*From June 30
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Stock Pickers' Fourth-Quarter Plays
                                                 Monday
Stock Picker    Stock          (Symbol)          Close
Mark Bacurin    ITC DeltaCom   (ITCD)            $18.000
David Henwood   Carnival       (CCL)              31.563
Frank  Jolley AVX       (AVX)          		14.813
Marty LaPrade   Dycom          (DY)               33.500
                Industries
Robert Montague SCB Computer   (SCBI)              7.750
                Technology
John Moore Jr.  NationsBank    (NB)               57.063
Gary Tapp       SCI Systems    (SCI)              28.563

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Copyright 2006 Jolley Asset Management, LLC