Thursday, November 6, 2008

Welcome Peter Cohan

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Obama Pick: Buy Jacobs Engineering (JEC)
Posted Nov 5th 2008 10:00AM by Peter Cohan

Filed under: Stocks to Buy, Obama Picks
Now that Senator Obama is President-elect Obama, what will he do with the economy and how can you profit from it? One way is to look for stocks that will benefit from a part of his proposed economic stimulus plan -- the creation of a National Infrastructure Reinvestment Bank that would spend $60 billion over 10 years on roads, bridges, ports, airports and rail lines.
One company that could benefit from this investment would be Jacobs Engineering (NYSE: JEC), which engineers municipal infrastructure. The stock is down 57% in the last year due to concerns about whether states and cities will build new infrastructure in the face of a crumbling economy. But does the Jacobs' stock drop mean it will go up now that Obama is President?
If its earnings estimates are credible, I would say Jacobs could be a good investment. That's because the stock trades at a Price/Earnings to Growth Ratio (PEG) of 0.55 and a stock whose PEG is below 1.0 looks undervalued to me. Jacobs' 0.5 PEG is based on a P/E ratio of 11.4 on earnings growth of 20.8% to EPS of $4.05 in the fiscal year ending September 2009.
And if Obama enacts his infrastructure plan in 2009, Jacobs' earnings prospects could brighten even more.

Mr. Cohan's post corresponds to the C flag in the chart.

Magically, just after the post JEC moved from $39.70 to $35.52, losing an amazing 10% in a day.

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