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Maltbie's Mix
Long: Fresh Del Monte; Short: Newmont Mining
Robert Maltbie, CFA, 11.29.02, 8:30 AM ET

NEW YORK - Each week Robert Maltbie, money manager and chief executive of Stockjock.com, selects a pair of stocks--one he recommends investors to go long on and the other that they should short.

The Long

Fresh Del Monte Produce (nyse: FDP - news - people )
Recent price: $22.75
Target price: $35

The Short

Newmont Mining (nyse: NEM - news - people )
Recent price: $24
Target price: $18

The Thinking


Robert Maltbie

Shares of Fresh Del Monte Produce have tumbled more than 20% in the last several weeks due to news of a potential lawsuit alleging securities fraud. While company executives have confirmed that there is no such filing, these types of allegations in the current market climate send investors fleeing. We do not think the allegation has much merit and the reaction by the market represents a buying opportunity. At current price levels, Fresh Del Monte, a Florida-based producer, distributor and marketer of fresh produce, is undervalued. At a conservative 10% long-term growth rate and price-to-earnings ratio of 12, Fresh Del Monte commands a price target of $35.

Investors have been moving assets into gold in the past year due to economic and political uncertainties worldwide. With many economies still stuck in recession mode, the demand for gold jewelry has slowed. Reports have indicated that demand has been declining for months. However, gold prices have continued to hold up. The latest buying interest in gold has propelled prices to record levels. But such interest has less to do with demand and consideration for the actual price of gold than the fear of the potential impact of war with Iraq and imminent threats of terrorism as well as the weak economic recovery. Uncertainties will drive investors into more safe-haven assets such as gold. However, with Iraq agreeing to the UN's resolution calling for inspections, Al Qaeda's networks in disarray and economic growth stabilizing, gold prices will fall as investors look for better opportunities elsewhere. Newmont and gold stocks have held steady due to fear factors. But at a current valuation of 80 times earnings, Newmont is overvalued. Look for a 25% discount to the current premium and a target of $18.

Disclosure: Maltbie's firm is currently long Fresh Del Monte and short Newmont.

More Maltbie's Mixes

Robert Maltbie is a principal of California-based Millennium Asset Management.


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FDP	18.25	+ 0.64

NEM	28.73	+ 0.89

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