Taking stock: experts top 10 Indiana companies for 2006.

• Author: Held, Shari
• Position: INVESTMENT

WE ASKED SEVERAL Indiana financial experts to comment on Indiana stocks they believe are poised to do well in 2006. Here's what they had to say about why these stocks are on their radar.

Five companies fall under the health-care umbrella. Warsaw-based Zimmer Holdings (ZMH), Symmetry Medical (SMA) and Biomet Inc. (BMET) are in the orthopedic-devices industry. Indianapolis-based Eli Lilly & Co. (LLY) and WellPoint Inc. (WLP) were also listed.

"We are looking closely at Biomet and Zimmer right now as two companies that we feel are undervalued," says Travis McEowen, Indiana investment manager for Wells Fargo Private Client Services in Fort Wayne. "Both stocks have had very poor years, with Zimmer down 21 percent and Biomet down 16 percent. They are trading below their five-year historical P/E ratios, and we think both carry a generous amount of upside potential."

Wells Fargo Private Client Services provides financial products and services through various banking and brokerage affiliates of Wells Fargo & Co., headquartered in San Francisco. Private Client Services oversees more than $170 billion in assets.

J.R. Humphreys, managing advisor with BKD Wealth Advisors' Indianapolis office, says Zimmer has some of the highest margins in the industry, although pricing pressures--the costs for orthopedic devices are not fully reimbursable by insurance--are contributing to low valuations industry-wide. "They are trading at values not seen since the mid-'90s. The last time they traded that low, soon afterward they traded up 30 percent from those low valuations."

Kevin A. Carey, vice president and portfolio manager for growth equities at 1st Source Corp. Investment Advisors Inc. in South Bend, says that although the industry has taken a recent beating, Zimmer has never been in better shape. "Our estimates are for 2006 earnings of $3.60 per share, up 17 percent over 2005, and sales growth exceeding a 35 percent growth rate. In the long-term, the demographics and the demand scenario are still very strong."

"Symmetry covers both sides of the orthopedic-implant coin," says Carey, referring to the fact that the company also makes the surgical instruments used to implant orthopedic devices. "A recent IPO, Symmetry is a formidable company in a very competitive orthopedic market. Well-positioned financially, globally and strategically, growth of 20 percent or more of earnings and 40 percent for revenue in 2006 should not be a stretch."

L. Gene Tanner, vice...