Analyst Likes Big Pharma -- and Big Macs


Barry James has some ideas for investors about squeezing some green out of a couple of blue chips -- even with much of the market in the red.

The president and portfolio manager of James Advantage Funds finds strong promise in two of the 30 Dow Jones Industrials.

"The three things we look for in buying a stock are good relative value...good historical earnings, and then we like to see the price appreciation going at a pace faster than the overall market," James told CNBC.


Stocks like Dow components Merck and McDonald's.

"What we see ahead is a very, very difficult market in 2008 -- in fact, we think we could have a bear market -- and so you need things that are going to survive and continue to do well with the consumer, regardless of how the economy goes," he said. "McDonald's meets that bill."

James points out that Merck has reported positive surprises in three of the last quarters, with expectations remaining low.

"The bad news about Vioxx is behind it," he said. "It's got a lot of room to run, like a lot of the pharmas, but Merck has been leading the pack, and we think it can continue to do so in the future."

James owns both stocks through his fund.