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Farrell: Stocks We Like and Those We Don't

The Annals of Internal Medicine published an article that advocated new mammography screening recommendations for breast cancer. The article was authored by the U.S Preventive Services Task Force and recommended; 1) against routine mammography screening for women ages 40-49; and, 2) biennial screening for women ages 50-74. Currently, says Junaid Husain of Soleil/Navigator Research, the American Cancer Society recommends annual mammography screening for all women age 40 or older. The worst case scenario says Junaid "assuming these two recommendations are taken at face value - we could see mammographic procedure volumes reduced from the current 37.2 million (per year in the US) to 15.6 million." That would be a decline of -58%.

There are currently 12,781 analog/digital mammography instruments in the US supporting those 37 million procedures. That would be, reasons Junaid, "too many instruments to support lower patient volumes under the new recommendations." Junaid emphasizes that it is 'impossible to know what impact the recommendations could have." But he sees this as a further negative for digital mammography equipment maker Hologic ( HOLX - sell rated). The stocks recent price is around $15 and the 52 week range is $18 to $9. Junaid had been looking for flat earnings for next year before this news. As he wrote, it is impossible to know the outcome of this situation, but with machines costing more than $250,000 he feels caution is warranted. The stock is currently valued at a bit more than 13 times his $1.17 earnings estimate for FY 2010, and he feels it is worth 9 times the calendar year estimate of $1.22, or $11.

From sell rated Hologic we move to hold rated Marathon Oil (MRO: hold; last sale around $35; 52 week range $35.71 to $19.34). Jacques Rosseau of Soleil/Back Bay Research will attend an analyst meeting in NY this Thursday. Jacques expects the company to focus on its upstream business and downplay the refining segment as it is suffering from weak fundamentals. While he believes it is possible for the company to someday revisit the idea of breaking itself into two pieces, he does not think this is the time as "it would be difficult for a stand alone downstream company to fund its capital budget and achieve an investment grade balance sheet."

MRO's capital budget for 2010-2011 is $5.9 billion a year. Jacques estimates that operating cash flow minus dividends will be "only $5.1 billion a year." MRO could issue more debt if it wanted to maintain the pace, or it could delay the $2.2 billion scheduled upgrade on a Detroit refinery.

And so to a buy rated stock. TJX (buy; recent price $38.50, 52 week range $40.64-$17.80). The company reported Q3 earnings Tuesday and came in a bit better than Jeff Stein of Soleil/Stein Research had projected at $.81 versus Jeff's estimate of $.78. Gross margins were ahead of plan. Comp store sales were up 7% for the quarter and inventories were off -5% even though last year inventories for the comparable quarter were off -6% making for a tough comparison. "The company", says Jeff, "is making its inventory work harder and more efficiently."

The company bought back $304 million in stock during the quarter and $541 million year to date. Despite the healthy repurchases, the company is projecting a cash balance at the end of their fiscal year of $992 million. Jeff heard nothing on the conference call that would suggest there is a deceleration in momentum. Management indicated November is of to a good start and they expect November comps to be up 7-9% and is conservatively planning December and January at +3% to +5%. For comparison, last years comps were -6% in November, 0% in December and -4% in January. Jeff's target is $43.

In economic news Tuesday, the modest +.1% gain in Industrial Production on its face could make you worry the recovery is losing steam. But it follows three unusually good months so it should be placed in that context. October's Producer Price Index increased +.3% and is down -1.9% from a year ago. Taking that at face value could lead you to a deflation fear, but the last six months have seen an increase of 4.8%. Capacity Utilization eked out a slight gain as compared to last month of 70.7% versus 70.5%. And the National Association of Homebuilders Index was hoped to go to 19 but registered 17 instead. Uncertainty about the first time home buyers tax credit probably caused some uncertainty. Taken all together, the Tuesday news was nothing to write home about.

And you have to love our Fed Chairman. In a speech on Monday Ben Bernanke said "we are attentive...to the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives will help insure the dollar is strong." I think he said he was worried about the dollar but then he wasn't worried about the dollar. I know I am worried about the value of the dollar as no country I am aware of has ever debased their currency to lasting prosperity. The Fed will not take action to defend the dollar. As Ben did say, the Fed has the dual mandate of price stability and maximum employment. The Treasury has historically been the Department to take action (if any) regards to the dollar. The Treasury Department will do nothing other than say they favor a strong dollar and hope the weak dollar drives exports.

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Vincent Farrell, Jr. is chief investment officer at Soleil Securities Group and a regular contributor to CNBC.