** For disclosure purposes it is important to note that I currently hold positions in each of the stocks that I recommend in this article.

See 2002 Stock Picks for my picks from last year.

HEALTHCARE/PHARMACEUTICALS:

Pfizer (PFE)
Current Price: $30.57
Risk: Low

Pfizer is not only home to such blockbuster drugs as Viagra, Lipitor, Zithromax, Zoloft, and Celebrex, but it has one of the strongest drug pipelines in the industry.� In addition, Pfizer’s potent salesforce is unparalleled in the industry, making it the marketing partner of choice for other drug firms in need of distribution.

Pfizer’s superb management team, led by Chairman and CEO Hank McKinnell, is determined to remain focused on the company’s core drug business as evidenced by its recently announced sale of its Adams chewing gum company (Dentyne, Clorets, Certs, Bubblicious and Halls) to Cadbury Schweppes for a healthy $4.2 billion.� The Schick Wilkinson shaving business is likely next in line for divestiture.

A final positive, which should not be overlooked by equity investors, is Pfizer’s outstanding credit quality.� The company’s strong cashflow enables it to maintain a relatively pristine balance sheet, earning Pfizer a rare AAA bond rating from S&P and Moody’s (one of only a handful of U.S. companies to receive this highest possible debt rating).

At its current price of $30.57, Pfizer sports a dividend yield of 2.0% (a bigger plus with the near certain reduction in taxation on dividends) and trades at roughly 16.6x projected 2003 earnings of $1.84 per share.� Pfizer is expected to grow earnings in the mid-to-high teens over the next several years, implying a roughly 1x PE/Growth ratio for the company.� That places Pfizer at a discount to its peers, making Pfizer a truly compelling valuation within the pharmaceutical sector.

Cardinal Health, Inc (CAH)
Current Price: $59.19
Risk: Low/Medium

Cardinal Health operates in the drug distribution industry, a $130 billion plus per year industry that’s been growing in the low double-digits over the past 5 years.� The company develops, manufactures, packages and markets products for patient care; develops drug-delivery technologies; distributes pharmaceuticals, medical-surgical and laboratory supplies; and offers consulting and other services that improve quality and efficiency in health care.

Cardinal has a strong balance sheet with a net debt-to-capital ratio of around 12%, and the company generated nearly $1 billion in operating cash flow for its most recent fiscal year ended June 30, 2002 .� � Management has proven adept at investing the company’s cash flow wisely, generating 30%+ returns on committed capital.

Interestingly, Cardinal Health offers investors somewhat of a hedge against the generic competition that the large branded drug marketers (such as Pfizer) will face in coming years.� Generic drugs offer drug distributors three to four times the operating margin of the branded products.� Cardinal should benefit from the approximately $35 billion of branded drugs coming off patent in the next several years.� Further operating efficiencies should be gained as growing drug volumes are passed through Cardinal’s relatively fixed distribution infrastructure.

Recently, Cardinal’s management reaffirmed its earnings guidance for the quarter and the year after announcing a $1.8 billion expansion of an outsourcing agreement with Express Scripts Inc.� And, said it still expects per-share earnings to grow 20% to 22% in the coming year.

At its current price of $59.19, Cardinal Health trades at roughly 15.5x forward earnings of $1.84 per share.� The company is expected to grow earnings at a 20% clip over the next several years, implying a PE/Growth ratio of less than 1x.� Like Pfizer, that places Cardinal at a discount to its peers, making it a truly compelling valuation within the drug distribution sector.

Amgen (AMGN)
Current Price: $48.34
Risk: Medium

Amgen, the largest independent biotechnology company, uses recombinant DNA and molecular biology to develop specialty therapeutic products in the areas of hematology, neurobiology and inflammation.� The company currently has two blockbuster products on the market, Epogen for anemia (stimulates red blood cells) in kidney dialysis patients and Neupogen to treat neutropenia (stimulates white blood cells) as an adjunct for chemotherapy and other indications.� Amgen also has two other potential blockbuster products in Aranesp (anemia) and Enbrel (rheumatoid arthritis).� Overall, Amgen has one of the best near-term product portfolios in the industry, with each product representing a multi-billion dollar market opportunity.

Company management recently announced that it expects 2002 products sales to increase in the low 40% range (better than previously expected) and earnings to come in at $1.37-$1.39 per share.� For 2003, earnings are projected to grow in the 25%-30% range to $1.75 -$1.80 per share.

At its current price of $48.34, Amgen trades at roughly 28x forward earnings of $1.75 per share.� The company is expected to grow earnings in the low 20% range over the next several years, implying a PE/Growth ratio of less than 1.4x.� This places Amgen at a discount to its large-cap biotech peers.� Given this compelling valuation and its industry leading product portfolio, Amgen is the stock to go with in the large-cap biotech sector.

Novogen Limited (NVGN)
Current Price: $9.56
Risk: Very High

Novogen Limited, an international pharmaceutical company based in Australia and the U.S. , is the world leader in isoflavonoid drug technology. The Company’s work began with naturally occurring isoflavones found in the human diet, which has since led to the discovery and development of phenolic (plant based) therapeutic technology.�

The company has developed a valuable patented technology platform based on these plant derived isoflavones and currently has a pipeline of drugs currently in human trials for indications of cancer, cardiovascular disease, and skin disease.

Conventional treatments for cancer have focused on killing actively dividing cells.� Unfortunately these treatments do not differentiate between a cancer cell and any other rapidly dividing cell such as those in the stomach lining, bone marrow or hair follicles.� This “toxicity” limits the usefulness of many drugs.�

Novogen has now developed the next generation in a new class of “smart” drugs - Signal Transduction Inhibitors (STI) - that attempt to block key growth pathways in cancer cells, while avoiding damage to healthy cells.� Novogen’s lead compound, Phenoxodiol, is the only anti-cancer drug in human trials that targets the multiple malfunctions that nearly all cancer cells have (other STIs only target a single malfunction).� Phenoxodiol has advanced to Phase II trials for the treatment of the most aggressive and difficult-to-treat cancers including ovarian, leukemia, prostate and breast.

The company has a strong balance sheet with enough cash to fund Phase II trials.

MEDIA:

Libery Media (L)
Current Price: $8.94
Risk: High

Liberty Media Corporation is a holding company with a variety of subsidiaries and investments operating in the media, communications and entertainment industries.� The company was started by TCI cable (acquired by AT&T in 1999) founder John Malone, who has long been regarded as one of the savviest investors/operators in the media industry.� �

Among Liberty ’s many investments are the following:

Publicly Traded

AOL Time Warner (7.5% ownership stake), News Corp (18%), Sprint PCS (19%), USA Interactive (20%), Vivendi Universal (3%), Primedia (5%), United Global Communications (European/Asian cable provider - 76% owned), Viacom, Cendant, Motorola, Priceline.com, and IDT Corp

Privately Held

Discovery Communications (who doesn’t watch the Discovery Channel or “Trading Spaces” on TLC? - 50% ownership stake), Starz! Encore (100%), QVC Network (42%), Jupiter Telecommunications (Japanese cable provider - 36% owned), and Jupiter Programming (50%), as well as small stakes in CourtTV, E! and several other entities.

According to Yahoo Finance, of the 15 analysts that currently cover Liberty Media, 9 rate the stock a “strong buy,” 3 rate it a “buy, “ and rate it a “hold.”� The median price target is $16.00 (nearly 80% higher than where the stock is currently trading), with a high price of $20.00 and a low price of $12.00 (still 34% above the stock’s current price).� Salomon Smith Barney, for example, estimates that the value of Liberty Media’s publicly traded holdings alone are worth roughly $7.00 - 8.00 per share and that a complete sum-of-the-parts analysis leads to a total valuation of roughly $15.00 per share for the assets held by Liberty Media.

One note of caution: although John Malone could do no wrong with TCI and Liberty media throughout much of the 1990’s, several of the transactions completed by Liberty in the past couple of years have been questioned by investors.� Liberty ’s investments in United Globalcom, Teligent, and ICG have been particularly disappointing.

ValueVision Media (VVTV)
Current Price: $14.98
Risk: High

ValueVision Media is an integrated direct marketing company that markets its products directly to consumers through various forms of electronic media.� The Company’s primary electronic media activity is its ShopNBC television home shopping business.� In addition, ValueVision operates Internet e-commerce (ShopNBC.com), vendor programming sales and outsourced e-commerce and fulfillment solutions (mainly to sports brands, such as ESPN and the NHL).

With programming available to approximately 54.0 million homes, ShopNBC is the third largest home shopping network behind market leader QVC (owned by Comcast) and the number two player, HSN (owned by Barry Diller’s USA Interactive).� Due to its focus on the higher margin jewelry category (jewelry accounts for nearly 75% of programming airtime and two-thirds of net sales for the network), ShopNBC’s audience is more female and more affluent than that of its two competitors (ShopNBC generates roughly $200 per average sale versus HSN’s average sale of $44).

At just under $15.00 per share, ValueVision is attractive for two reasons, both of which have to do with General Electric’s 40% ownership stake in the company.� It is widely known that GE only likes to own businesses that can be #1 or #2 in their respective market.� It won’t be long before GE makes a move to either significantly grow revenues and improve the operating performance of ShopNBC itself or looks to sell it to someone else who can.� ShopNBC could make a good fit for QVC and/or HSN, which would not only be able to realize significant cost savings from a merger, but could possibly even look to add a second shopping channel focusing on just Jewelry or merge the ShopNBC programming into their existing shopping channel and reformat ShopNBC for another type of programming (Barry Diller, for example, has expressed interest in developing a travel-oriented cable network).

Finally, with virtually no debt and just over $4.0 per share in cash, ValueVision does not have the balance sheet issues that continue to plague many of the companies operating in the media sector.

One note of caution: Early in 2002, ValueVision began running into significant problems attempting to upgrade their old legacy infrastructure to a new customer service/order fulfillment system.� This negatively impacted the operating performance of the company for much of 2002.� Although management recently claimed to have stabilized the new platform and that operations were now running at appropriate levels, any future negative announcements regarding problems with this system would likely put downward pressure on the stock price.

CNET Networks (CNET)
Current Price: $2.71
Risk: Very High

This article will be updated shortly with a summary rationale for this stock pick.

iVillage (IVIL)
Current Price: $0.94
Risk: Very High

This article will be updated shortly with a summary rationale for this stock pick.

TECHNOLOGY:

Zoran Corporation (ZRAN)
Current Price: $14.07
Risk: High� �

This article will be updated shortly with a summary rationale for this stock pick.

INDUSTRIAL:

Ford Motor (F)
Current Price: $9.30
Risk: Medium/High

This article will be updated shortly with a summary rationale for this stock pick.

RETAIL:

Staples (SPLS)
Current Price: $18.30
Risk: Medium

This article will be updated shortly with a summary rationale for this stock pick.

Jennifer Convertibles (JENN)
Current Price: $5.00
Risk: High

This article will be updated shortly with a summary rationale for this stock pick.

FINANCIAL:

Washington Mutual (WM)
Current Price: $34.53
Risk: Medium� �

This article will be updated shortly with a summary rationale for this stock pick.

ENERGY:

Hydrogenics Corporation (HYGS)
Current Price: $3.53
Risk: Very High

Hydrogenics develops and manufactures fuel cell systems for all major power markets - transportation, stationary, and portable power. Fuel cells generate electricity by converting the chemical energy from hydrogen and oxygen into electrical energy. In October of 2001, General Motors acquired 24% of HYGS in conjunction with the formation of a strategic alliance between the two companies to accelerate the development of fuel cell technology into global commercial markets.

One note of caution: It will be at least five years and likely several more before we see any fuel-cell powered automobiles brought to market for true commercial use.� So, HYGS, like the other stocks in this sector, will continue to be a fairly speculative play in the near-to-medium term.

By: Craig Ettinger