DAVE HARRIS: This is Dave On Stocks Podcast #38. I'm Dave Harris. This show is for Friday February 9^th 2007. I'm a long term investor managing a diversified portfolio of stocks.

Home builder Toll Brothers (TOL) offered a discouraging first quarter earnings forecast. Now investors are caught up in the weak housing market and seem to be ignoring the strong January same store sales results. Overall the January same store sales numbers were pretty good from the retail stocks. Wal-Mart (WMT) reported a 2.2% same store sales rise. That's better than expected. Target (TGT) also beat views with a 5.1% gain. Federated Department Stores (FD), Nordstrom (JWN), JC Penny (JCP) and surprisingly the Gap (GSP) all beat Wall Street expectations. The Gap raised their earnings guidance, but I still have a sell recommendation on the stock. I'm not impressed with their flat same store sales. The expectation was for a 7.7% drop. If you want a good retailer, I recommend buying Wal-Mart or Target. Thanks to the consumer's use of gift cards (they don't count until they're redeemed) and the late arrival of cold weather, the majority of merchants had positive results. I'm encouraged by the strong consumer spending in play here.

Results beat expectations in the 1st quarter for Disney (DIS). The company had a 43% earnings rise excluding one time items and revenue rose 10% over last year. Revenue increased 29% for the movie studio thanks to the "Cars" and "Pirates of the Caribbean: Dead Man's Chest" DVD sales. Successful cable and network programming added to the strong quarter. However, results were weaker for Disneyland and consumer products. Overall I think the business looks great for Disney and I see strong growth ahead. I think DIS is going to $40 per share. I would buy the stock now at $35.22 per share.

I liked what I saw from Cisco's (CSCO) earnings. The networking equipment maker’s profit rose 40% in the fiscal second quarter beating expectations. EPS was .33 cents Sales were up 27%. This company experienced strong demand for internet equipment and I think the company's acquisition of Scientific-Atlanta last year was a great move. With video on demand and high definition TV on the rise, a big source of revenue has been the sale of set-top boxes, which are used to get digital services. CSCO also expected the 3^rd quarter would jump 19-20%. I see the stock going to $32. I would buy CSCO. Currently the stock is $28.13 per share.

For the 4^th quarter, Cheesecake Factory (CAKE) reported a 9% decline in profit because of higher costs. The results were generally in line. I suggest you sell CAKE and buy McDonald's (MCD) instead.

News Corp (NWS) reported a decline in profit for the second quarter. But excluding the gain from last year's sale of an educational publishing unit, the company had an 18% rise in earnings. Revenue also increased 18%. Results beat Wall Street expectations. The movie division had a 57% earnings rise thanks to films like "The Devil Wears Prada" and "Borat". Results were better than the company's own expectations. More subscribers were added to Sky Italia, their Italian satellite platform, but results were disappointing from MyNetwork TV and Fox. The company is in the process of restructuring the networks. Overall I'm happy with the results. I have a buy recommendation. Right now the stock is $25.29 per share and I think NWS is going to $30.

There was nice 12% rise in first quarter profit from engineering services company Emerson Electric (EMR). Results beat expectations with EPS at .55 cents vs. .48 cents last year. Revenue increased 11% also ahead of Wall Street views. The double digit gains from EMR's industrial and process management divisions offset results from their air conditioning unit, which had a weak performance in the U.S. International success was a driving force behind this great quarter with operations up 11%. EMR forecast full year 2007 earnings would grow 12-16%. That's a raised guidance and generally in line with analyst views. I like the results and recommend the stock here at $44.58 per share. This stock is going to $50. Buy EMR.

Whirlpool (WHR) lowered their guidance for 2007 because of weak demand and high material costs. The company is going to try raising prices. Meanwhile the 4^th quarter fell 14%. I suggest you sell the stock.

I still recommend you buy shares of retail REIT Simon Property Group (SPG). I talked about SPG's great earnings in podcast #37 when it was selling at $115.13 per share. I said it would go to $120. I underestimated because the stock is selling at $121.01 per share. AG Edwards made a mistake downgrading the stock from buy to hold (on February 8). The stock is down because of it. Now is a great time to buy. Take advantage of this error in judgment by the brokerage. Now I think SPG is going even higher to $130 per share. SPG is a strong buy here.

Applications for jobless benefits increased last week by 3,000. Still the employment numbers look good. Wholesale inventories fell .5% in December. Still for the full year 2006, inventory building was strong. The labor department said 4^th quarter productivity rose 3%, that's more than expected. But for the full year 2006, productivity was fairly slow. Still, I think this demonstrates strength in the economy. Labor costs were lower in the quarter so I see little threat of inflation. That means the Fed is unlikely to raise rates any time soon. The ISM's non-manufacturing sector signaled expansion and rose to 59.0 last month, that's more than expected. I like to see that the service sector is growing.

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.