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Back to basics.

EARNEST Partners' Paul Viera uses fundamentals to pick top performers

Paul Viera believes in doing his homework The CEO of EARNEST Partners L.L.C. (No. 8 on the BE ASSET MANAGERS list with $2 billion in managed assets) selects stocks using a two-tier strategy. "First, we go through a screen of a broad universe of stocks to identify the financial and economic characteristics that would suggest outperformance for a particular stock," he says. Then, Viera applies a number of evaluation techniques to this narrow band of targets, including market and operating trend analysis, growth and profitability measurements, and "looking at the stock from a macroeconomic view."

Through this process, Viera has identified stocks in the technology and pharmaceutical sectors, four companies that he believes should do substantially better than the market over the next few years. One of his top picks is marchFIRST (Nasdaq: MRCH), an Internet-related professional services firm. "The company provides end-to-end solutions for everything from Web application design and development to network and Web infrastructure," he says of the company, which has a Fortune 1000 clientele and billings that begin at $5 million.

He likes the stock primarily because marchFIRST is "in a fast-growing sector and they're involved with some very stable clients [that are] interested in how to make their businesses more effective in everything they do."

His second choice is Elan (NYSE: ELN), a pharmaceutical firm based in Ireland. "It has a strong pipeline of drugs, such as a treatment for chronic pain and epilepsy," he says. "The biggest upside for this stock is that it's at the forefront of technology with respect to Alzheimer's disease" A respected firm in a growing sector, Viera expects the stock to grow by more than 20% a year because of such transactions as its co-development deal with Biogen Inc. (Nasdaq: BGEN) to create a drug for the treatment of multiple sclerosis.

The third selection is Chiron (Nasdaq: CHIR), another pharamaceutical company that focuses on infectious and cardiovascular diseases as well as cancer research. "With any of the drug companies, it's really a question of [whether] they have drugs that solve a problem and is the problem big enough to result in substantial revenue," explains Viera.

Another factor that will drive Chiron's sales is its recent acquisition of PathoGenesis Co., a Seattle-based pharmaceutical firm, for $700 million. Viera believes that the move will complement Chiron's research efforts as they relate to the development of new cures for infectious diseases.

Finally, Net2Phone (Nasdaq: NTOP) is a Web based telecommunications company that produces software which allows users to make phone calls and send faxes over the Internet. Viera say this company is a gem largely because of the company it keeps. For example, Microsoft uses the Net2Phone software for all the long-distance calls that occur through its instant messaging network. Additionally, AT&T recently acquired a 39% interest in the company and AOL is going to include NET2Phone as part of its new release.

Viera says that NET2Phone offers the perfect model for the companies that he adores--small innovators that have the potential to grow into monolithic entities. Says he: "Just because you're big doesn't mean you create the best mousetrap."

The Fantastic Four
Company
Exchange: 12-Month P/E on Projected
Symbol Price(*) Price Target 2000 Earnings

Chiron Corp. $49.88 $65 61.6
Nasdaq: CHIR

Elan Corp. 57.38 70 N/A
NYSE: ELN

marchFirst Inc. 21.69 26 32.4
Nasdaq: MRCH

Net2Phone 27.00 38 N/A
Nasdaq: NTOP

Company Est. 5-Yr.
Exchange: Annual EPS
Symbol Growth Why Stock Will Outperform

Chiron Corp. 23.26% * Pharmaceutical company is in a
Nasdaq: CHIR fast-paced sector. Its
 growth rate with respect to
 revenues is very high.

Elan Corp. 22.15 * The pharmaceutical company's
NYSE: ELN pipeline is strong. From
 a valuation standpoint, it trades
 at a discount to its peers.

marchFirst Inc. 36.98 * The Internet-telephony company
Nasdaq: MRCH offers more stability
 than its peers. It will probably
 grow 30% a year.

Net2Phone 47.50 * The Web-based concern has solid
Nasdaq: NTOP partners to help
 it grow. It's a preferred
 supplier of long distance for
 top Internet companies.


(*) Closing price as of 8/25/00

Source: Paul Viera, EARNEST Partners Inc.; Zacks Investment Research, Big Charts
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Article Details
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Author:Sykes, Tanisha Ann
Publication:Black Enterprise
Article Type:Brief Article
Geographic Code:1USA
Date:Nov 1, 2000
Words:707
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