By LYNETTE HAALAND
Rochester Business Journal

Paychex Inc., Home Properties of New York Inc., and Xerox Corp. are the favorite homegrown stock picks of some Rochester brokers and the firms they represent.

Three of the four brokerage firms interviewed-Sage, Rutty & Co. Inc., Merrill Lynch & Co., Kirlin Securities Inc. and Wall Street Financial Group Inc.-cited Paychex.

Merrill Lynch recommends Paychex, as well as its other three picks, only as part of a diversified portfolio, says Jackalyn Noller, director of the firm's central New York operation. It has an accumulate rating on Paychex.

"That means it is a good solid investment today even though it may not move much for the next year," Noller explains.

Merrill Lynch also thinks Paychex will continue to deliver the same or higher dividends.

"It is definitely a buy for a long-term investor in a portfolio approach," Noller says.

The Penfield-based company also is one of the picks of broker John Inferrera, senior vice president of Kirlin Securities.

The only drawback with Paychex is that it always trades at a premium, Inferrera says. Currently, it is trading around 60 times earnings.

"The reason why it continues to trade at a premium is they are extremely consistent in delivering top- and bottom-line growth and people are willing to pay a premium for that," he says.

Paychex is a favorite at Wall Street Financial as well, says Spencer Corzine, trading supervisor. The locally based broker/dealer represents the trades of 275 independent brokers mainly in the Upstate New York region.

"People buy Paychex because it has done so incredibly well over last 10 years," Corzine says.

Paychex's product cross-selling strategy is working, he adds.

"(Cross-selling) is a cheap way to get more assets and more sales in a down market," Corzine says.

Many brokers are looking for stocks of companies with real assets, he says. Both Paychex and Xerox fit into that category.

"A reason we're looking at (Xerox) is that (there) is more upside potential than downside," Corzine says. Those who have bought the stock for $4 or $5 have done quite well, he notes.

Home Properties is one of Kristin Dowejko's favorite local picks. She is a financial consultant at Sage, Rutty who builds and manages equity portfolios for wealthy individuals.

"It's a great company with a fantastic management team, and they are paying good dividends," Dowejko says.

Home Properties currently pays a dividend of $2.28 a share, which is equivalent to a yield of 7.5 percent, she says.

The real estate investment trust is trading around $30 a share, which Dowejko considers a pretty normal range.

Another plus she sees with Home Properties is that in the last several months it has started selling off poorly performing assets including some in the Buffalo market.

Additionally, due to lower interest rates, investors are pulling funds out of money market accounts where they are getting lower returns and moving into conservative alternatives like Home Properties' stock, Dowejko says.

Among stocks of local interest not eligible for ranking on Rochester's Top 50, which is limited to homegrown firms, Corning Inc. is a favorite of brokerage firms. Others are Global Crossing Ltd., Nortel Networks Corp. and HSBC Holdings PLC.

Demand still is strong for Corning's products, Dowejko says. Plus, the world's largest maker of optical fiber has relatively little long-term debt. And its stock is trading at only 30 times earnings.

"At $16, it is a great entry point to what I would consider a core technology stock to add to a portfolio," Dowejko says.

On the more speculative side, she also likes Nortel, the world's second-largest supplier of technology equipment. On June 15, Nortel announced it would post a $19.2 billion second-quarter loss, including a writedown of $15.2 billion in intangible assets. But within the last several weeks, it was awarded a $1 billion contract from Sprint PCS Group, a division of Sprint Corp.

"Once telecom begins to turn around, (Nortel) should participate and the stock price should reflect it," Dowejko says. "It's an industry leader and cheap."

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