Recap of Saturday, February 8Constellation Brands; Tech Data Corp.

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

David Asman: Dennis Kneale, you’ve just come back from the World Economic Forum in Switzerland, what did you find out?

Dennis Kneale, managing editor: CEOs are totally in a funk. I did a dinner with sixty CEOs and did a quick poll. Almost all of them think we are going into Iraq, no matter what. These are foreign and domestic CEOs. A third of them say to look for a big terror attack somewhere in the U.S. this year, in retaliation. With that kind of a mood you can’t really rebuild the economy. They’ve lost their swagger, they’ve lost their hope, and we need them to come back before the market will.

Quentin Hardy, Silicon Valley bureau chief: We can get their swagger back by getting them interested in making a buck. Put down the champagne flute, get back home and get back to work.

Dennis Kneale: And start spending, you’re absolutely right. But if these guys don’t feel good, if they’ve lost their hope for where the economy is going, they’re not going to spend and that means we don’t come back.

David Asman: OK Joanne, what do you have for us?

Joanne Gordon, staff writer: I’ve got Hewitt Associates (HEW). Everyone is so down on consulting firms, and human resources is so hum, but they do human resources consulting.

David Asman: They’re the ones at your company that decide what kind of medical plan you get, et cetera.

Joanne Gordon: Bingo. Not recruiting. And no matter what the economy is doing, everyone has to have a great benefits package and healthcare and everyone has to figure out compensation. These guys went public in June 2002, they’ve had straight earnings growth and they’re going to continue to. I like them.

Dennis Kneale: I would just worry about buying into a firm that, like it or not, relies on economic activity and hiring. The last thing that companies are focused on right now is how to treat their employees better.

Joanne Gordon: You still always have healthcare and they want to save cost and they’re going to hire actuaries to do it.

David Asman: Alright, you always need healthcare. Quentin Hardy, Microsoft is moving into China, right?

Quentin Hardy: Yeah, this is the cover story in Forbes on Microsoft (MSFT). It’s a very smart move on their part. They’re investing more money in China because they hate the piracy. They’re doubling down on their investment there.

David Asman: They’re spending more money in a place that pirates all this software that they make? This doesn’t seem to make any sense.

Quentin Hardy: It’s astonishing. Proportionally Microsoft makes nothing in China. It’s a huge market for them, but the piracy kills them. So, what’re they doing? They’re putting in more money. That’ll get the eye of the government, that will make the government crack down, that will raise the standard of living. History shows that you raise the standard of living and piracy falls away.

Leigh Gallagher, staff writer: It’s a smart strategy, but hardly a reason to buy to stock right now. China is a black hole. Companies like AIG (AIG), the insurance company, has stumbled for China even though it was technically founded in China.

David Asman: How long is it going to take for Microsoft to really see this payoff?

Quentin Hardy: I wouldn’t say that this flips next week, but it’s a bet that it pays off in three to five years.

David Asman: Leigh Gallagher, we all need paychecks, and there’s a company that makes them.

Leigh Gallagher: Paychex (PAYX) is a company founded by billionaire Tom Golisano. It basically handles payroll processing. For years, being a shareholder in this stock was like collecting an automatic paycheck. The stock was up tenfold over the past decade, through the end of 2001, earnings growth 33 percent - average annual earnings growth for 20 years. The stock is down, but it’s a good time to get in the stock.

Joanne Gordon: I think it is ironic, or coincidental, that we both chose human resource companies.

Leigh Gallagher: It’s true. You would think “less paychecks, means less income for this company.” But, in reality, companies are looking to eliminate whole departments and they can have companies like Paychex handle it for them.

Dennis Kneale: It’s really nice when two people can agree on something that is so wrong in it’s concepts.

Makers & Breakers

Constellation Brands (STZ)

Jim Awad, Awad Asset Management chairman: MAKER

Constellation makes wine, spirits and alcoholic consumables. Basically we like it because they have a consistent earnings record. Historically they’ve grown between 20-30 percent through modest internal growth, acquisitions, strategic acquisitions where they cut the cost and expand the distribution of the brands. And we think that if you can buy a defensive name at a valuation as low as this stock is selling at, in an uncertain economy, if it’s valuation went up just to that of the stock market in general, it would go up 50 percent.

Elizabeth MacDonald, senior editor: MAKER

Yeah, break out the hats and horns. I like this stock. I looked through the balance sheet and the financials and could find nothing wrong with this stock. I think it’s a really strong play and it’s trading cheap at around ten times earnings.

Jim Michaels, editorial vice president: BREAKER

I wouldn’t buy the stock. First, a stock like this should sell at a relatively low PE Ratio. Secondly, they’ve got a lot of debt. They’ve just bought Hardy, the big Australian wine company. Australia is awash in wine. Constellation is incurring debt to make this acquisition. I wouldn’t touch it.

Tech Data Corp. (TECD)

Jim Awad: MAKER

Tech Data is a distributor of information technology products. It’s particularly timely that we talk about this stock now, as it got hammered last week. They are getting hurt, short-term, by the slowdown in information technology spending, and they announced that. They have a great long-term record, at some point technology spending is going to increase, distributors are getting a bigger piece of the market, and the strong distributors are getting a bigger share from the weak distributors. So we think the stock could go up 50 percent. It could go a point or two lower in the short term, it’s selling below liquidation right now.

Jim Michaels: MAKER

I’ve got to agree with Jim on this one. If the stock goes any lower it’s an even better buy. Solid earnings, solid assets, it’s well positioned to take advantage of the tech pickup which is going to happen someday.

Elizabeth MacDonald: MAKER

They’re the number two distributor in the world. The worry about this stock was that more companies are aggressively cutting out the middleman to go right to the customers. But they’re in 70 countries, a lot of these companies do not have these distribution channels set up, so they’ll have to turn to Tech Data.