DAVE HARRIS: This is Dave On Stocks podcast # 35. I'm Dave Harris. This show is for Monday January 29^th 2007. I'm a long term investor with a diversified portfolio of stocks. The earnings keep rolling in from companies.

Microsoft (MSFT) reported that fiscal second quarter profit went down 28% as a result of the company's delay in the new Vista windows operating system. EPS was .26 cents from .34 cents last year. Still, they beat estimates. Revenue was up 6% which also beat expectations. Since November, businesses have had the newest version of Vista. Consumers can buy the system tomorrow (January 30^th). The company's servers generated a 35% increase in profit. Revenue for their entertainment division went up 76% on the Xbox 360 video game unit. The company expects a strong year with double-digit growth. Current quarter, EPS is expected around .46 cents-that's expected. Full year EPS expected around 1.46 per share and revenue at 50 billion-that's also in-line. I have little confidence in the Zune player. Still the company expects to sell 1 million by mid-year. I think it's no match to the Apple iPod and that Microsoft should stick with the servers and X-box. I like the earnings here and business looks good going forward. I would buy the stock. Currently it's at $30.60 per share. I see MSFT going to $35 dollars.

Now Caterpillar CAT reported an increase in 4^th quarter profit that missed slightly according to some estimates. Still profit went up 4.3%. EPS was 1.32 per share from $1.20 last year. Engine and machinery sales brought sales results 14% higher and above analyst estimates. The mining, gas and oil industries are the strong points for CAT's full year forecast which is guided in the range of $5.20 to $5.70 per share. Those are pretty reassuring numbers. I suggest you buy CAT. It's selling at $61.73 per share. I'm expecting the stock to hit $75 this year.

I wasn't too impressed with the results from Halliburton (HAL) the oil services company. Despite a 40% decline for the 4^th quarter, the results slightly beat expectations. Revenue went up 8% with EPS at .62 cents from .51 cents. Full year net income results were lower, but beat expectations thanks to strength in energy services. The company thinks demand will be strong in 2007. I think the KBR unit is a weakness for the company. I'm not expecting strong growth this year from Hal, but I suggest you hold the stock as an investment long term.

DuPont (DD) the plastics and specialty materials maker had a higher 4^th quarter that matched expectations. Raw material costs are the main issue I have with this company, and the poor housing market is a drag on the business. I also see a weak year ahead for the company. The CEO, Charles Holliday said it was a very uncertain year. Auto production is expected to be slow, and that'll hurt DuPont's earnings. For this year, the company expects to make $3.15 per share, and that's lower than expected. Because of the company's dependence on housing and autos and their uncertain forecast, I suggest you sell DD.

There was a rare positive piece of news on housing last week. We had a 4.8% rise in new home sales last month, which was more than expected. Some on Wall Street think this means housing has bottomed, but I think housing will decline further. Look at what companies are saying. Tim Eller, the chief executive of residential builder Centex (CTX), said it's too early to say housing has bottomed when commenting on the company’s quarterly loss. D.R. Horton (DHI) had lower quarterly quarter profit and said the housing business is going to be challenging. I stick to my belief that housing has not bottomed. I suggest you avoid this sector as an investment for now.

My stock pick of the week is Simon Property Group (SPG). I'm a big fan of this REIT that focuses on shopping centers and malls. This is one of the largest owners of shopping centers in the U.S. Last quarter they beat expectations with a strong increase in funds from operations and higher revenue. Recently the company said full year 2007 FFO would be between $5.70-5.80 per share and earnings somewhere around $1.82-1.92 per share. I think this company looks great going into 2007. After SPG reports what I believe should be good earnings this Friday, then consider buying the stock. Simon Property Group (SPG) is my stock pick of the week.

Durable goods orders rose 3.1% last month. I think this paints a really good picture for the manufacturing industry. But some investors feel the economy may be growing too quickly and that the Fed will be less likely to cut rates. I'm expecting the Fed to pause on rates after their next open market committee meeting. The 2 day gathering starts tomorrow (January 30^th).

More companies report earnings this week. The telecom company Verizon (VZ) and drug manufacturer Schering-Plough (SGP) report earnings Monday. Conglomerate 3M (MMM) and cereal maker Kellogg Co. (K) are on Tuesday. Wednesday earnings come from drug maker Eli Lilly (LLY) and coffee maker Starbucks (SBUX). Marathon Oil (MRO) reports Thursday. The big retail REIT Simon Property Group (SPG) has earnings Friday.

That's all for this podcast of Dave On Stocks. I'm Dave Harris. I'll talk to you again soon with another show. Write me with any questions or suggestions about the podcast use the "contact us" link on the web page. My website is www.daveonstocks.com. This is Dave On Stocks.