Some Morningstar Picks for this week

My $.02: As Canadians investing with above par loonies, these equities appear even more attractive.

"Wide Moat" stocks mentioned below that I find attractive include:

1. MCD
2. CSCO
3. HOG
4. WMT

If you can buy them cheap and become comatose for 5-10 years, you will likely do well.

l


WEEKEND EDITION:

Cheap Dollar Reveals Some Bargain Stocks, But It Pays To Be Picky

3-9-08 10:20 PM EDT | E-mail Article | Print Article

NEW YORK (Dow Jones) -- Sorting through the gloom about the beaten down dollar and the slowing U.S. economy, some stock-pickers are finding bargains in companies that actually benefit from a cheaper buck. About 40% of S&P 500 companies derive more than half of their revenue from business overseas. For those companies, the dollar's decline can offset slowing domestic demand. "It's the weak dollar's dirty little secret," said Art Hogan, chief market strategist at Jefferies & Co. General Electric Co. (GE), International Business Machines Corp. (IBM) and Intel Corp. (INTC) stand to gain from higher overseas sales spurred by the decline in the U.S. dollar, Hogan says. So too do retail companies such as McDonald's Corp. (MCD), Las Vegas Sands Corp. (LVS) and Nike Inc. (NKE). Broadly, technology and health care are two sectors that get a leg up when the dollar is down. A large chunk of their revenue comes from overseas customers. More domestic-oriented companies don't get that revenue lift. But some of those U.S.-centric stocks, trammeled by investors this year, are looking tantalizingly cheap. "We're starting to see stocks oversold that are domestically based, that we're taking a deeper look at," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. Scrounging for deals in equities comes on the back of a sharp sell-off in U.S. stocks and a quickening drop in the dollar, a tumble that both reflects and has fed concerns about the slowing economy. This week, the U.S. dollar hit new lows against the euro, which rose as high as 1.5459 Friday. The buck has lost 13% against a basket of six major currencies in the past year. Friday's employment report, which showed a loss of an estimated 63,000 jobs in February, was the latest blow. That surprise decline in jobs "reflects the ongoing deterioration in the outlook for U.S. growth and employment as the economy tips into recession," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon, in a note Friday. Sour sentiment about the dollar and economy has battered the major indexes as investors have fled equities and parked their cash in commodities. The S&P 500, says Standard & Poor's, has now made an official correction with a decline topping 10% this year. A silicon lining Nevertheless, equities hold some future bright spots. The tech sector is appealing to some. Its overseas sales get help from the cheaper greenback, and it may be partially buffered from what appears to be a consumer-driven recession. "Technology has benefited from the weaker dollar and the fact that global economies and emerging markets are upbeat and expanding," Fitzpatrick said. He named Oracle Corp. (ORCL) and Cisco Systems Inc. (CSCO) as two stocks with "reasonable" prices given their expected growth rates. Investing in tech during a market retreat is risky. The Nasdaq composite has lost more than 18% this year. Plus, the tech sector is vulnerable to a buildup in inventories, which can lead companies to slash prices. But sweetening its attraction are shares that have got a drumming in the past two months: Telecommunications services and technology are two of the worst hit sectors this year, with losses of around 20%. Home grown The sell-off in tech and other sectors has made U.S. equities a value-hunter's paradise. Roland Manarin, who oversees more than $500 million in assets as head of Manarin Investment Counsel Ltd., in Omaha, Neb., says he started buying financial- and home building-related mutual funds about two months ago when he was shopping for bargains. There are plenty. The S&P 500 (SPX) has lost 12% this year, while the Dow Jones Industrial Average (DJI) is down 10%. Manarin, an Italian immigrant who says he is convinced that both the U.S. currency and economy will rise again, says he tells clients to stop watching the news if they call in a panic. "If you feel brave, now is the time to buy -- when the crowd is despondently selling, we should be buying," he wrote to clients recently. For those bold enough to wade into choppy equity markets, some name brands stand out. Deutsche's Fitzpatrick lists paint maker Sherwin-Williams Co. (SHW) and motorcycle maker Harley-Davidson Inc. (HOG) as options once the market settles down. Given the slowing economy, defensive plays can involve investing in companies that produce what is needed, compared to what is desired. Discount retailers and quick-service restaurants, for instance, have continued to do well in the current climate. Shares in Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT) have gained more than 4% this year despite warnings from the retail sector about a penny-pinching consumer. "Instead of steak at Outback [Steakhouse] you can go to McDonald's and get a hamburger -- these things are happening," Fitzpatrick said. Though its stock has taken a hit this year, McDonald's said strong international sales boosted revenue in the fourth quarter.