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Research Highlights: This Week's Recommendations

With many stocks devastated, Morningstar analysts are busy asking two questions. Among our stock analysts the question is: "Has this stock fallen far enough to make it a bargain?" For some of the stocks we published this week, our answer is yes. (See below.) On the fund side, the key question is: "Was this fund just a bull-market baby, or does it have a long-term edge that will help it ride through the lean times?" As you’ll see, our analysts aren’t shy about giving you their answer.

All told, we published about 70 Fund Analyst Reports and more than 100 Stock Analyst Reports this week. We also updated Fund Analyst Picks--where our analysts pick their favorite funds in each category--for Specialty Health and Mid-Cap Growth. Here are the week’s highlights.

Funds We Like

 Fidelity Select Technology (FSPTX), by Christopher Traulsen
"Fidelity maintains a massive corps of tech analysts that keeps fresh ideas flowing into the fund."

 White Oak Growth Stock (WOGSX), by William Harding
"Oelschlager's conviction in his strategy results from years of practice. He has been managing money for more than 30 years, so he has seen his share of corrections and bear markets."

 Harbor International (HAINX), by William Samuel Rocco
"…though it disappointed in the growth rallies of 1998 and 1999, it has prospered in a variety of other markets and has outgained 90% of its rivals over the past decade."

Other funds that got the thumbs-up included Fidelity Destiny (FDESX), Weitz Hickory (WEHIX), Ariel (ARGFX), Masters’ Select Equity (MSEFX), Van Kampen Equity-Income (ACEIX), and Gabelli ABC (GABCX).

Stocks We Like

 Level 3 Communications (LVLT), by Michael Hodel
"Even after factoring in the reduction in the company's prospects, Level 3 stock trades significantly below our estimate of its intrinsic value."

 Compaq Computer (CPQ), by Joseph Beaulieu
"We believe Compaq shares are worth around $15."

 American Express (AXP), by Craig Woker
"…we believe that the firm's attractively priced shares currently carry much more potential reward than downside risk."

 Global Marine (GLM), by Corey McElveen
"…the stock has now fallen to a level that's a fair price to pay for the company's future performance."

 Avon Products (AVP), by Craig Woker
"Shares trade at only 21 times First Call 2001 earnings estimates, average for the sector despite the firm's above-average prospects."

Funds We’re Not Crazy About

 CGM Focus (CGMFX), by Scott Cooley
"Aside from Heebner's uneven record and high-risk strategy, the fund's tax position is a worry for potential investors."

 AXP Progressive (INPRX), by Bradley Sweeney
"…we think investors should demand more from an actively managed fund that charges four times more than Vanguard Mid Capitalization Index."

 Value Line (VLIFX), by Christopher Davis
"…its stock-picking model is often caught asleep at the switch."

Another fund that got the thumbs-down this week was  SSgA Small Cap (SVSCX).

Stocks We’re Not Crazy About

 Albertson’s (ABS), by Josh Peters
"We’re amazed at how much money management is pouring back into store construction without a net benefit to either the top or bottom lines."

 Sprint PCS (PCS), by Todd Bernier
"PCS is up 20% over the past month; as a result, enterprise value per subscriber is high at $3,600."

 Krispy Kreme (KKD), by Corey McElveen
"…we calculate its stock to be worth less than half the current price."

Other stocks we’re down on include eBay (EBAY) and Cerner (CERN).

New Janus Analyst Reports
Analyst Catherine Hickey updated two Janus funds this week, and senior analyst Christine Benz brought Janus 2 under coverage for the first time.

 Janus Venture (JAVTX)
 Janus Enterprise (JAENX)
 Janus 2 (JTWOX)

We Initiate Coverage On…
Besides Janus 2, we published one brand-new fund this week, and initiated full coverage on one stock.

 Aegis Value (AVALX), by Russel Kinnel
"The fund's stellar three-year record shows managers William Berno, Paul Gambal, and Scott Barbee can achieve strong results with a small asset base."

 Sherwin-Williams (SHW), by Langdon Healy
"In our discounted cash flow model, we limited long-term sales growth to about 6% annually while simultaneously moderated profit margins, generating a fair price of $20.00."

Manager Changes
We’ve seen quite a few manager changes of late. We published new Analyst Reports this week on the following funds, giving our view of the changes at their helms.

 Mutual Shares (MUTHX)
 Mutual Beacon (BEGRX)
 Mutual Qualified (MQIFX)
 Mutual European (MEURX)
 WM Equity Income (CMPBX)

What’s Up Next Week on

  • New Analyst Reports on Third Avenue Value (TAVFX) and Third Avenue Small-Cap Value (TASCX). It’s always interesting to see what vulture-investor Marty Whitman is up to.
  • The latest on earnings. Each morning, check our Stock Research Center for Stock Analyst Notes, where our analysts dissect the latest earnings releases, warnings, and announcements.
  • Senior analyst Scott Cooley’s new Fund Analyst Picks for the large-blend category. Look for it on Wednesday.
  • Video Reports three times a day. Check out our weekly schedule for what’s on tap.
  • Pat Dorsey, our director of stock analysis, on Fox News Channel. Pat makes his weekly appearance on the Bulls & Bears show on Saturdays at 10:00 a.m. EST.
  • Russel Kinnel on CNBC. See our director of fund analysis each Friday morning at about 10:25 a.m. EST.

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