GENERAL MILLS INC. $58 (New York symbol GIS; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 345.2 million; Market cap: $20.0 billion; WSSF Rating: Above average) earned $0.74 a share in its third fiscal quarter ended February 25, 2007, up 8.8% from $0.68 a year earlier. Revenue rose 5.2%, to $3.05 billion from $2.9 billion. Most of the gains came from its Yoplait yogurt and Progresso soup operations. However, sales at the cereal division, its largest business, fell 4% due to price discounting at major food retailers. General Mills will probably increase cereal prices later this year. The stock has gained nearly 20% in the past year, and now trades at 18.5 times its projected fiscal 2007 profit of $3.13 a share. That’s cheap in light of General Mills’ market position and brand portfolio. The company also has a long history of increasing dividends. The current annual rate of $1.48 yields 2.6%....

VERIGY LTD. $23 (Nasdaq symbol VRGY; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 59.0 million; Market cap: $1.4 billion; WSSF Rating: Speculative) earned $0.28 a share in its first fiscal quarter ended January 31, 2007, up 12.0% from $0.25 a year earlier. These figures exclude one-time costs from the company’s recent spin off from Agilent Technologies Inc. Revenues fell 2.9%, to $165 million from $170 million. Despite recent weakness in the chip testing industry, Verigy’s balanced product portfolio should let it stay profitable. It should also benefit from its plan to design chip-testing equipment, and outsource the manufacturing to low-cost countries. The company’s heavy research spending, 14% of its revenue of $14.25 a share, should help it stay competitive in a rapidly changing industry. Verigy is a buy.

HONDA MOTOR CO. LTD. ADRs $35 (New York symbol HMC; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.8 billion; Market cap: $63.0 billion; WSSF Rating: Above average) is Japan’s third-largest carmaker, and the world’s largest producer of motorcycles. It also makes lawnmowers, electrical power generators and snow blowers. Two-thirds of Honda’s sales come from outside of Japan. The company’s revenue grew at a compound annual rate of 11.1%, from $55.4 billion in 2002 (fiscal years end March 31) to $84.3 billion in 2006. Revenue should climb to $92 billion in 2007. Earnings nearly doubled, from $1.40 per ADR (total $2.7 billion) in 2002 to $2.76 per ADR ($5.1 billion) in 2006. (Each Honda American Depository Receipt represents one Honda common share.) Honda sold 3.4 million vehicles in fiscal 2006, and aims to increase sales to 4.5 million in the next five years. Consequently, it plans to open a new $550 million assembly plant in Indiana as well as a new $140 million engine plant next to its facility in Ontario, Canada. Honda will also spend $80 million to expand production at two of its plants in Mexico....

TOYOTA MOTOR CORP. ADRs $129 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.8 billion; Market cap: $232.2 billion; WSSF Rating: Above average) is the world’s second-largest automobile maker after General Motors, based on annual vehicle sales. However, Toyota should overtake GM as the world’s largest car company later this year. The company operates plants in Japan, the United States and over 20 other countries. Sales outside of Japan account for two-thirds of its total revenue. Other operations include financing and non-automotive products such as pre-fabricated housing. The automobile and financing operations supply 90% of Toyota’s revenue, which rose from $107.4 billion in 2002 (fiscal years end March 31) to $182.9 billion in 2006, or 14.2% compounded annually. Revenue should reach $189 billion in 2007....

Japanese automakers Toyota and Honda have been terrific performers for us since we first recommended them in June 2004. Toyota is up 90%, while Honda has gained 71%. Both continue to do a good job anticipating new trends in the auto industry, such as hybrid-engine cars, and creating products that help them stay ahead of competitors. The recent jump in the value of the Japanese yen could increase the cost of their products in the United States. But both companies are expanding their North American operations, which cuts their currency risk. Both are also doing a good job keeping their operating costs down. We still see both Toyota and Honda as buys for conservative investors. But you should limit your investments in overseas stocks to, say, 10% of your total portfolio....

BECKMAN COULTER INC. $63 (New York symbol BEC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 61.7 million; Market cap: $3.9 billion; WSSF Rating: Average) makes lab equipment that doctors and medical researchers use to detect substances in blood and other bodily fluids. Beckman has a long history of using acquisitions to expand its business. In 1997, the company (then called Beckman Instruments) acquired Coulter Corp. for $875 million, a world leader in blood cell analysis. Investors feared that Beckman paid too much, and the stock fell 15% on the news. But Coulter’s technology greatly expanded Beckman’s sales. The company’s latest acquisition is Biosite Inc., which makes heart disease testing equipment....

WYNDHAM WORLDWIDE $34.57 (New York symbol WYN; SI Rating: Extra risk) (973-753-6000; www.wyndhamworldwide.com; Shares outstanding: 188.2 million; Market cap: $6.2 billion) is one of the world’s largest hospitality companies. Wyndham was a subsidiary of conglomerate Cendant Corp., before Cendant distributed its 100% holding in Wyndham to its shareholders in July, 2006. The shares then began trading on the New York exchange. Spinoffs usually do better than comparable stocks for years after a spinoff. That’s what we expect in this case. Wyndham provides services in three areas: 1) Wyndham’s RCI Global Vacation Network has 3.4 million members who have exchange access to 60,000 non-hotel vacation properties (cottages, villas, houses and apartments) in 100 countries. RCI is the world’s largest vacation exchange network and among the largest global marketers of vacation rental properties. RCI has 50 worldwide offices. Its vacation rental business has a roster of 35,000 property owners in 22 countries. RCI accounts for 54% of Wyndham’s revenues. 2) Wyndham Vacation Ownership develops and sells timeshares, and also provides consumer financing and property management services to owners. Its 150 timeshare resorts serve 800,000 owners in North America, the Caribbean and the South Pacific. Wyndham is the world’s largest timeshare developer and manager. This division accounts for 29% of revenues....

WENDY’S INTERNATIONAL $32.15 (New York symbol WEN; SI Rating; Above average) (614-764-3100; www.wendys.com; Shares outstanding: 96.1 million; Market cap: $3.1 billion) has completed the buyback of up to $282 million worth of its stock as part of a plan which it hopes will enhance stockholder value. It bought back nine million shares at $31.33 each. Share buybacks boost per share earnings and increase the proportionate ownership of the remaining stockholders. But Wendy’s stock will make little progress until it improves the performance of its restaurants. We now feel Wendy’s holders should sell.

TRANSACTION SYSTEMS ARCHITECTS $30.43 (Nasdaq symbol TSAI; SI Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 37.3 million; Market cap: $1.1 billion) fell recently on news that it will restate previous results to correct errors on stock options that it granted between 1995 and 2002. The company now says that in the three months ending March 31, 2007, it will take a $3 million charge to correct these errors. It says that no member of current senior management was involved in the events that led to this charge. It still expects to report problems with its internal financial controls, and plans for resolving them. Transaction expects to report earnings of $0.05 to $0.12 per share in the three months ended December 31, on revenue of $92 million to $95 million. A year earlier, it earned $0.41 a share or $15.2 million on revenue of $85.1 million. The company needs time to regain investor confidence. However, these problems may have already spent the bulk of their impact on the stock’s price, and the company is in a good position to profit from long-term growth trends in the payments software industry....

SHERMAG INC. $1.91 (Toronto symbol SMG; SI Rating: Speculative) (819-566-1515; www.shermag.com; Shares outstanding: 13.3 million; Market cap: $25.5 million) makes high-quality residential furniture at plants in Quebec and New Brunswick. It has suffered in the past few years from the strength of the Canadian dollar, which cuts the price of imported furniture and raises Shermag’s export prices. Shermag’s sales fell 17.4% in the three months ended December 29, 2006, to $38.4 million from $46.5 million. The company lost $7.7 million or $0.58 a share, compared to a loss of $4.3 million or $0.32 a share a year earlier. In addition to the impact of the higher Canadian dollar, Shermag had to absorb startup costs at a new distribution centre in Montreal. The latest quarter also included a $3.5 million charge to shut down two plants in Quebec, as part of its shift of production to Asian suppliers. Competition from China remains a threat, but Shermag is on track to ultimately shift 50% of its manufacturing to Asia. The U.S. dollar has risen against the Canadian dollar since the last quarter ended but it still remains a concern, since Shermag makes around 70% of its sales in the U.S. However, Shermag still holds a well-established reputation for highquality furniture and designs....