My Picks from Fortune Special Investors Issue - June 25 2007

Growth and Income Stocks

Altria Group (MO - $78) Since Kraft spinoff, Altria can focus on expanding overseas tobacco sales.

If we assume initial earnings of $10.7 billion grow at a rate of 8.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $76.8 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $101 billion. To complete the calculation we add these two figures together, subtract the long-term debt for MO ($7.95 billion), and divide by the outstanding shares (2.10 billion) to get a per share intrinsic value of $80.55.
Its dividend of 4.9% makes it attractive. But I would still want it to drop some more to get a good Margin of Safety.

Bargain Growth Stocks

Chubb (CB - 54.55) Firm has a profitable niche in insuring prized possessions of the wealthy.

If we assume initial earnings of $2.57 billion grow at a rate of 8.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $18.5 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $24.2 billion. To complete the calculation we add these two figures together, subtract the long-term debt for CB ($3.34 billion), and divide by the outstanding shares (401 million) to get a per share intrinsic value of $97.94.
The Wall Street estmate for the next 3 to 5 years is 10%. So this one looks like a good bargain.

ConocoPhillips (COP - 81.04) At 8 times earnings, oil and gas giant sells for a steep discount to peers.

If we assume initial earnings of $15.8 billion grow at a rate of 7.50%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $111 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $142 billion. To complete the calculation we add these two figures together, subtract the long-term debt for COP ($22.0 billion), and divide by the outstanding shares (1.63 billion) to get a per share intrinsic value of $141.59.
Looking good.

Small Wonders Stocks

Grey Wolf (GW - 8.16) Shares of contract oil and gas driller appear deeply oversold.

If we assume initial earnings of $224 million grow at a rate of 8.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $1.61 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $2.11 billion. To complete the calculation we add these two figures together, subtract the long-term debt for GW ($275 million), and divide by the outstanding shares (185 million) to get a per share intrinsic value of $18.68.

Foreign Value Stock

Petroleo Brasileiro (PBR - 65.76) Brazil's state owned oil giant looks undervalued compared with its US peers.

If we assume initial earnings of $11.8 billion grow at a rate of 8.00%, and we discount those future earnings at a rate of 16.00%, we arrive at a net present value for the company's next 10 years of earnings of $81.5 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $102 billion. To complete the calculation we add these two figures together, subtract the long-term debt for PBR ($15.7 billion), and divide by the outstanding shares (1.27 billion) to get a per share intrinsic value of $132.43.
Analyst estimate a growth of 15% for this stock

Deep Value Stocks worth consideration.

Loews(LTR) Conglomerate with tobacco and hotel stakes selling less than sum of its part.

Lufkin Industries (LUFK) Oil field-equipment supplier is expected to boost long-term profits nearly 20* annually.

Tidewater (TDW) has the worlds largest fleet - 450 ships - serving offshore energy drillers.