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A Jiffy Stock Story

To technicians--the analysts who chart a stock's daily gyrations--Pennzoil-Quaker State (PZL) is an enticing stock that's about to break out to new highs. And to the pros who track fundamentals, this global automotive consumer products company is a turnaround story with appeal to both value and growth investors.

Andy Addison, a technician who heads his own advisory firm, says the stock has "formed a base" at 10 a share at the start of 2001 and has been pushing up since. Now at 14, "it could well hit 18 by the end of the year," he says. Insiders, he notes, recently have been buying shares. At J.P. Morgan H&Q, analyst Jay Wilson sees "solid fundamentals and attractive valuation" in the company which, he says, represent a terrific opportunity for growth, income, and value investors. Wilson says profit growth should average 40% over the next two years. And, he adds, the stock sports a hefty 5.7% dividend yield.

The company was formed when Pennzoil and Quaker State merged in 1998. It has since sold assets, including oil refineries in Louisiana, which are expected to net $133 million. The company has evolved from an integrated oil concern to one specializing in automotive consumer products. It now sells 1,300 items, including the top-selling Pennzoil and Quaker State motor oils, in 50 countries and operates 2,000 fast-lubrication Jiffy Lube and Q-Lube service centers. The asset sales will crimp revenues by about a third, says Wilson, but will improve margins and the quality of earnings. The proceeds will help Pennzoil-Quaker State reduce its $1.3 billion debt by at least $200 million by yearend, figures Wilson. The stock is trading at 13 times his 2001 estimate of 95 cents per share, and 9 times his 2002 estimate of $1.35 per share. Investors' anxiety about the dragging economy eclipsed the upbeat first-quarter results that Viacom (VIA) reported on Apr. 24. Bolstered by acquisitions, the media and entertainment giant's quarterly revenues soared 90%, to $5.75 billion, and earnings before interest, taxes, depreciation, and amortization (EBITDA) zoomed 145%, to $1.15 billion. But investors weren't impressed: Viacom's shares fell nearly 2, to 51.30 a share that day. With 50% of Viacom's revenues coming from advertising sales, shareholders worry the slowdown will hurt future revenues. Indeed, Viacom expects second-quarter cash flow to shrink due to a weak TV ad market and a possible actors/writers strike.

But some Viacom bulls think the worry is overblown. "The stock's current weakness is an opportunity to buy the values that Viacom represents," says Lewis Rabinowitz, president of R. Lewis Securities, who has been a long-term Viacom bull. He first bought into Viacom in December, 1987, when the stock was trading at a split-adjusted 21. He trimmed his holdings when it ran up to 76 last August, but came in for more when the stock fell to 40 later in the year. "Viacom could double in 12 months" as the economy starts snapping back, says Rabinowitz.

Mario Gabelli, whose mutual funds own a 7% stake, also expects Viacom to be a winner when the economy improves. And Merrrill Lynch's Jessica Reif-Cohen calls Viacom "a compelling value." Despite the tough ad market, she says, "we continue to believe Viacom will excel relative to its peers in both tough and strong times." Although its stock, like that of most other dot-coms, has plunged 75% from its high in October, (HOTJ) may surprise the Street with better than expected first-quarter results, says a source close to the online job recruiter. Hotjobs' 9,100 corporate clients include IBM, Microsoft, PricewaterhouseCoopers, and Nike. They subscribe to its services and each pays basic monthly fees that account for 74% of Hotjobs' revenues. Employers usually pay big contingency fees to other agents for each job compared with an average monthly fee of $800 paid to Hotjobs.

Revenues have been zipping up, from $9 million in 1999 to $97 million in 2000. CEO Dimitri Boylan says that despite the slowing economy, employers in both tech and nontech companies continue to hire skilled workers, in part because they are available following layoffs in various industries.

Kelly Flynn of UBS Warburg figures revenues will rise to $147 million in 2001. Hotjob's depressed valuation is too attractive to pass up, says Flynn. One source thinks Hotjobs will beat first-quarter estimates with a narrower loss and post earnings in the third and fourth quarters--rather than in the fourth quarter as analysts project.

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