INTERNATIONAL BUSINESS MACHINES CORP. $105.33, New York symbol IBM, has agreed to pay $745 million for Telelogic AB of Sweden. The price is equal to 40% of the $1.8 billion or $1.21 a share that IBM earned in the first quarter of 2007. Telelogic’s software helps its customers in the aerospace, defense, telecommunications and automotive industries streamline and test complex engineering projects. This is IBM’s 43rd software acquisition since 2001. Expanding by acquisition adds risk, but these purchases nicely complement IBM’s computer hardware and services businesses, and expand its client base. Software will probably account for half of IBM’s profit by 2010. IBM is a buy....

APPLE INC. $124.49, Nasdaq symbol AAPL, hit a new all-time high this week after it confirmed that it will start selling its new iPhone on June 29. The new device combines a mobile phone, a digital music player and a camera. At around $500, the iPhone is more expensive than competing models, but Apple’s marketing skill and reputation for ease of use generally let it charge premium prices for its products. Strong consumer interest should help Apple reach its one-year sales target of 1% of the world mobile phone market. We continue to hold a high opinion of Apple and its products. But its high price in relation to earnings (p/e of 40) and revenue (about $24 a share) limits its appeal right now. Apple is still a hold....

CEDAR FAIR L.P. $29 (New York symbol FUN) has stayed in a narrow range for the past few months, partly due to concerns over the partnership’s high long-term debt (5.7 times equity) following last year’s purchase of five theme parks. But thanks to extra cash flow from these new assets, Cedar Fair recently increased its annual distribution rate from $1.88 a unit to $1.90 (6.6% yield). Best Buy. WINDSTREAM CORP. $15 (New York symbol WIN) has also made little progress since Alltel Corp. spun it off in July 2006. But most investors own Windstream for its $1.00 dividend, which yields 6.7%. Although the company is losing traditional telephone customers to cable companies, strong demand for high-speed Internet and digital TV services should give it enough cash to cover the dividend. Buy. IDEARC INC. $38 (New York symbol IAR) earned $0.82 a share in the first quarter of 2007, down 2.4% from $0.84 a year earlier. These are pro-forma figures that assume Verizon spun off the company at the start of 2006. Revenue crept up to $806 million from $801 million. Idearc aims to expand advertising revenue at its telephone directories, and the cost of new sales staff hurt its profit growth. But higher revenues should help it maintain its $1.37 dividend (3.6% yield). Buy.

BAXTER INTERNATIONAL INC. $57 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 651.5 million; Market cap: $37.1 billion; WSSF Rating: Average) operates in three areas of the biotechnology industry. Its Bioscience division makes equipment and drugs for treatment of hemophilia (40% of revenue). It also makes intravenous drug delivery equipment (40%), and dialysis equipment for kidney disease patients (20%). International markets account for roughly half of its sales. We generally recommend investors avoid pharmaceutical companies, due to the huge costs and risks of developing new drugs. But Baxter is different.

Business mix cuts risk

The company gets over half of its revenue and profit from medical devices and supplies. Hospitals and clinics must constantly replenish these items, which cuts Baxter’s risk. The company is also the leader in many of its markets, so customers are reluctant to switch to new suppliers....

WAL-MART STORES INC. $46 (New York symbol WMT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 4.2 billion; Market cap: $193.2 billion; WSSF Rating: Above average) is doing a good job expanding profits at its international operations. In its first fiscal quarter ended April 30, 2007, overseas sales rose 18.5%, while profit grew 19.3%. However, high gasoline prices, the slump in the housing market and bad weather hurt customer traffic at its stores in the United States, which account for 75% of its revenue and 80% of its profit. Same-store sales in the U.S. rose just 0.6% in the most recent quarter, compared with a 3.8% gain a year earlier. Still, Wal-Mart’s quarterly income grew 6.3%, to $0.68 from $0.64, while total revenue rose 8.4%, to $86.4 billion from $79.7 billion. Same-store sales will probably rise only slightly for the balance of fiscal 2008, as the company re-models many of its stores. But better inventory management, particularly for seasonal goods, should expand Wal-Mart’s profit margins....

NVIDIA CORP. $34 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 362.0 million; Market cap: $12.3 billion; WSSF Rating: Average) earned $0.33 a share in its first fiscal quarter ended April 29, 2007, up 37.5% from $0.24 a year earlier. Revenue rose 23.8%, to $844.3 million from $681.8 million, as strong sales of notebook computers spurred demand for its video chips. Nvidia’s chips now have 60% of the notebook market. Demand for video chips will continue to grow as manufacturers of mobile phones and video games enhance the graphical features of their products. But the company faces growing competition from Advanced Micro Devices, which recently purchased video chip specialist ATI Technologies. Nvidia is a hold for aggressive investors....

UNITED TECHNOLOGIES CORP. $69 (New York symbol UTX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 994.4 million; Market cap: $68.6 billion; WSSF Rating: Above average) has agreed to pay roughly $340 million for a Finnish maker of water mist fire suppression systems. The cost is equal to 42% of the $0.82 a share (total $819 million) that United Technologies earned in the first quarter of 2007. Water mist systems tend to put out fires more quickly than traditional building sprinklers, and cause less flooding and water damage. This operation should strengthen the company’s growing building security business. United Technologies is a buy.

BECKMAN COULTER INC. $68 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 61.9 million; Market cap: $4.2 billion; WSSF Rating: Average) recently agreed to pay $85 a share (total $1.55 billion) for publicly traded Biosite Inc., which makes heart disease testing equipment. However, a rival bid forced Beckman to increase its offer to $90 a share ($1.67 billion). Biosite’s products generate higher profit margins than Beckman’s substance detection systems, which helped justify the higher offer. Biosite has now received a $92.50-a-share offer, and Beckman has refused to match it. Under the terms of its original agreement, Biosite will have to pay Beckman a $54 million termination fee. To put that in context, Beckman earned $0.59 a share (total $37.1 million) in the first quarter of 2007....

FAIR ISAAC CORP. $37 (New York symbol FIC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 57.4 million; Market cap: $2.1 billion; WSSF Rating: Average) develops statistical-based credit scoring systems that calculate the likelihood an individual will pay back a loan. The company’s best-known product, the FICO score, helps banks, credit card companies and other lenders cut their loan losses. The stock fell last year after three leading credit bureaus, Equifax, Experian, and TransUnion, teamed up to launch a new credit score to compete with FICO. However, they also offer FICO scores to their clients. Fair Isaac feels these three firms have a strong incentive to push their own system instead of paying fees to use FICO, and the company has filed an antitrust lawsuit. It could take years to settle, but the suit improves the company’s long-term prospects....

Apparel companies have to deal with all sorts of factors outside of their control, such as bad weather and unpredictable fashion shifts. This increases the uncertainty of earnings, as well as the volatility of their stock price. While these three top apparel companies have struggled in the past few months, our view is that their well-established brands will help them overcome their recent setbacks. All three are also cheap in relation to their long-term prospects. LIZ CLAIBORNE INC. $34 (New York symbol LIZ; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 104.5 million; Market cap: $3.6 billion; WSSF Rating: Average) designs and markets a wide variety of clothing and accessories for men and women. The company sells most of its products through department stores. However, the recent merger of Federated Department Stores and May Department Stores has hurt its sales. Many retailers are also selling more private label apparel, which has hurt demand for Liz Claiborne’s national brands....