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Recap of Saturday, Jan. 25:Borders; Novartis

Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:

David Asman: This week's Informers are Elizabeth MacDonald, senior editor; Chana Schoenberger, staff writer; Mike Ozanian, senior editor and Victoria Murphy, staff writer. Victoria, let's start with you: Internet security, it used to be a big deal. Is it still a big deal?

Victoria Murphy, staff writer: I don't think it is. A report coming out Monday shows that spending on Internet security is actually half of what analysts have been saying. I think stocks like Symantec (SYMC), Check Point (CHKP) and Network Associates (NET) stand the most to lose because they specialize in firewalls and anti-virus software.

David Asman: So, you're saying you don't want to buy these stocks.

Victoria Murphy: No, I think they are the ones that are most at risk because what they sell is what most buyers have already bought and probably won't be buying again.

David Asman: Chana, what do you think?

Chana Schoenberger, staff writer: Well, I've actually seen figures saying that the threat from Internet security is growing, that hackers are getting more devious. There are more blended threats. The new viruses are available online for other hackers to take, almost as soon as they get hacked. This is kind of scary.

Victoria Murphy: Well, Chana can believe the hype. The buyers of about 164 companies were interviewed in this report. It says that half of them were cutting back their spending on security, which hasn't been said before.

David Asman: Elizabeth MacDonald, the X factor, what's that?

Elizabeth MacDonald, senior editor: That's Xerox (XRX). I see this stock is making a comeback, surprisingly off its October low of $4.

David Asman: But, it's doubled since October.

Elizabeth MacDonald: Yeah, it's trading at $9. Here's why. Stock Diagnostics is this great research firm in Boca Raton. They've been watching their trailing free cash results and they're coming in really strong at 1.7 billion, so I think that Xerox might be a stock you want to watch. And we know they came off this terrible accounting scandal, but they've cleaned out their problems.

David Asman: Victoria, what do you think about Xerox?

Victoria Murphy: I think investors should look at this as a short-term play. If you look at the history of Xerox stock price, going back thirty years. If you invested $10,000 thirty years ago, it would come out to $3,200 now. And if you invested $10,000 ten years ago, it comes to $6,000. This isn't adjusted inflation. So, if you adjust for inflation, it's even worse. Long-term performance hasn't been good, but this could be a short-term play.

David Asman: Woulda, shoulda, coulda. What do you think about this Elizabeth?

Elizabeth MacDonald: I can't dispute the numbers, but I'm always for rebound stocks and stocks that have come off these horrible situations where they have a new board.

David Asman: We'll talk about horrible situations. You should have seen my student loan portfolio. Chana, you say that banks can actually make money off of student loans. How?

Chana Schoenberger: They're already making a tremendous amount of money off of student loans and you'd know this if you were paying them. Citibank (C) just announced a big program with Harvard University. They are going to be offering student loans to every one of Harvard's 12,000 grad students. Now what's unusual about this is that Citibank already does some $900 million in student loans. They're going to be sharing the risk with Harvard, which means that for all those grad students who don't have that good of credit or are international students who can't get credit here, Harvard is going to say they don't care, they want Citibank to give them a loan and they will back it up.

David Asman: Good for Harvard, good for students and good for the banks.

Chana Schoenberger: That's right.

David Asman: It's a winner. All right, Mike Ozanian. Speaking of winners, you've got a prediction about the Super Bowl. We couldn't go the whole show without talking about the Super Bowl. Who's going to win?

Mike Ozanian, senior editor: I'll tell you right now, the Tampa Bay Buccaneers are going to win and I'm going on that based on the last four years we've done team valuations at Forbes. The team in the Super Bowl that we value higher preceding the Super Bowl has gone on to win the game. The Tampa Bay Bucs are valued at about $180 million more than the Raiders. They have about twice as much operating income, so I'm going with Tampa Bay.

David Asman: So, bottom line is, you think they spend more money on their players, they'll be a better team and they'll win the Super Bowl. Victoria, I bet you're an Oakland fan and you don't agree with that one, do you?

Victoria Murphy: Well, I'm not painting my face this weekend, but if fan support is any indicator, I think the Raiders are destined to win.

Elizabeth MacDonald: Well Mike isn't there some sort of revenue sharing system happening in the NFL?

Mike Ozanian: You're right, winning the Super Bowl doesn't help the teams at all, but if you're a fan or maybe a better, go with the Bucs.

David Asman: We usually advise people to bet on stocks. You're saying, bet on the Bucs. Take Tampa Bay on to 4 points. Tampa Bay's going to win. Everyone agree with that, except Victoria?

Elizabeth MacDonald: I'm a New York fan, all the way.

David Asman: Chana, do you have a play on this one?

Chana Schoenberger: I don't know. I don't think it's about the valuation. I think it's about how much the players want to win and it's hard to make an index of that.

David Asman: So, who is it? The Bucs?

Chana Schoenberger: I'm not going to take a position on this one.

David Asman: Mike's the only one who's solid on that. Bet on the Bucs!

Makers & Breakers

David Asman: This week our guest stock picker is Colin Ferenbach, fund manager at Tocqueville Alexis Fund. He brought along two stocks he owns and thinks you should too.

Borders (BGP)

Colin Ferenbach, fund manager: MAKER

You walk out of this building and there's the 6th Ave. subway station. If you take a train out to Queens, everybody's reading a book. Books have been here, books are here and books are here to stay.

David Asman: This is the best bookseller you know?

Colin Ferenbach: Borders, Barnes & Noble (BKS) and (AMZN) too are all companies that are going to grow gradually over time. They are good solid companies that are going to continue to gain market share and the stock is very depressed.

David Asman: Mike?

Mike Ozanian, senior editor: MAKER

Relative to earning, the stock price is trading at nearly 11 times. That's half the market multiple. And they've figured out how to make money besides selling books. They have those coffee shops inside selling muffins and coffee. Very high margins there. I like it.

Elizabeth MacDonald, senior editor: BREAKER

I'm a breaker on this stock. and Barnes & Noble are really going after Borders in a big way. Borders is getting it in the neck from those two guys. They also just came off a disappointing Christmas season, so I just don't see sales coming in strong. They actually lowered expectations.

Novartis (NVS)

Colin Ferenbach: MAKER

Back to local news, there was a story in The New York Times the other day saying that living to 100 is not what it used to be. A lot more people are living to 100. Look at the mortality tables. People are living a lot longer and there's a reason for that and it isn't global warming. It's medical technology and the pharmaceutical companies are in the leading edge of that. It's a group that's selling at a relatively low multiple in its market history.

David Asman: Ok. Elizabeth, what do you think?

Elizabeth MacDonald: MAKER

I really like Novartis. The balance sheets are pretty complete. They also just increased their stake in Roche, up to 32.7 percent. I think that's a brilliant move and they've got a great cancer drug. I agree it's a baby boomer age and the sales are going to be increasing.

David Asman: A lot of reasons for it. Mike?

Mike Ozanian: BREAKER

I'm staying away from it. Two of the last three years, sales per share have fallen, that's why they're trying to buy a piece of Roche. They had to pay a lot of money for it. And they have $750 million of convertibles on their books. Simply put, that's something that those convertible holders can pass on and become common shareholders, which dilutes the stock.