WSW: Louis Rukeyser's Wall Street Summary &amp; Discussion $treet

Top 580. Nov 18, 2002 10:14 AM

» Nutmet - Barton Biggs

Barton Biggs made one important point not listed in the summary. He said that the technology sector would rally in 2003 but that it was a busted sector for the next 5 years.

-- posted by Nutmet

Top 581. Nov 23, 2002 6:36 AM

» SteveT - 11-22-02

Lou opened by saying investors have been enjoying an early bird special, sliced bear. This week the DOW was up for the seventh week in a row, something not done since early in 1998. Since the October lows the S&P 500 is now up 20%, the DOW up 21%, the NASDAQ up 32% and the Merrill Lynch Technology Index up 59%.

Frank Cappiello has enjoyed the past seven weeks but admits he don’t know if this is a new bull or a bear rally. He is encouraged by the market going up on bad news and when good news arrives it goes up further. Frank uses Copper prices as an indictor of industrial production and that had a nice gain this week. Franks said Copper is expensive and people don’t buy it unless they plan on using it. Cappiello is also happy to see money flow and supply increasing, thinking this will be good for stock prices ahead. Frank said if investors miss this move they could miss as much as 1/3 of the bull market. Now he would buy SBC Communications (SBC) and Arthur Gallagher (AJG).

Alison Deans is still cautious on the economy. She fears while other economic sectors are coming back the consumer is pulling back. She does not see another recession but a very soft recovery through the first half of next year. Deans says there are many good values to buy now but don’t count on making money until the second half of next year. Stocks Alison likes now are Johnson & Johnson (JNJ), AOL Time Warner (AOL), and Sprint (FON). She would avoid consumer stocks and Utilities.

Kim Goodwin is still optimistic on the economy and markets, saying her glass is a little more than half full. Kim thinks the Christmas shopping season will be better than many expect, led by consumer electronics. Goodwin recommends Best Buy (BBY) and International Game technology (IGT). She would sell Eli Lilly (LLY).

Lou introduced special guest Bob Smith Manager T. Rowe Price Growth Fund. Bob thinks now is a great time to buy growth stocks, thinking next year the economy and capital spending will pickup. Growth is often thought of as momentum investing but Smith takes a slightly different approach. He prefers to identify growth companies and buy them when they are good values, allowing compounding of returns over time. Stocks he holds and still would rate a buy are United Health (UNH), First Data (FDC), and Citigroup (C). One of his main criteria is to find companies with good free cash flow and using it wisely. He is not afraid to buy a company with an above average multiple if he thinks it can grow at twice the market average over a long time frame. Growth at reasonable prices commonly called GARP is very reasonable now. Smith likes the idea of buying quality at the same prices as an average stock. Bob is somewhat surprised at the length of this bear market. Saying the first phase was not a surprise, that being the Internet bubble and Tech overvaluation. He was caught off guard by the earnings compression, saying this was mostly due to lack of faith. Lou asked what it will take to restore faith. Time, not all managers, accountants, and analysts are liars. Smith sells a stock if his analysis was wrong and earnings do not grow as he expected or he thinks they will fall off in the future. He also sells if he sees a better alterative in the market place. Now he would sell consumer staples and some Technology.

Frank asked his current cash levels. Around 3% and that is about average. The low recently was about 1.5% and got as high as 6%. Alison asked for examples of how multiple compression across the board has made prices of good companies close to that of bad ones. Some examples would be Citigroup and JP Morgan Chase, United Health and Bristol Myers, First Data and IBM. Smith advised to look at each of these pairs of companies and their long term growth records and earnings estimate for next year. Kim asked if there was still upside on managed care companies. Smith thought so and is expecting growth in the mid double digits next year and are these stocks are trading at reasonable prices after people have been rotating into technology.

Lou asked if Bob uses Technical analysis. He does look at it some but prefers to concentrate on what he does well, for him that is fundamental buying and selling. Over time looking for companies that generate cash has served him well. Lou wanted to know if any of the Large Tech companies are appealing. Smith identified a few great companies but saying they maybe a little to high to buy now but over the next 2 or 3 years will outperform. Some of them being Cisco, Dell, Microsoft, and Affiliated Computer. Over that time frame he expects the broad market to return about 6-7%. Saying you can’t expect growth of earnings much faster than the economy.

Next week I expect Lou to have some ideas for your holiday shopping list. Special guest will be Dana Telsey chief retail analyst Bear, Stearns & Company Inc.

-- posted by SteveT

Top 582. Dec 1, 2002 7:50 AM

» SteveT - 11-29-02

This year Lou offered us some clever gift suggestions instead of a display of what is hot this year. For the U.S. economy he offered “The little engine that could”. It is still going to be an uphill climb to full recovery but this week with positive news on jobs, manufacturing, and consumer confidence things are looking better. For those of us still holding U.S. stocks Lou offered up a “voucher for Long-term care” for sticking it out through terrorist attacks and corporate scandal. For those smart enough to be buying stocks in early October an “early discount certificate”. The DOW has had its best two-month period since 1987. Lou pointed out that in 1987 some “smarty pants” were trying to convince small investors out of stocks forever. Never mind even after a terrible bear market the DOW is still five times the level of the 1987 bottom.

Liz Ann Sonders said something rare is occurring, the market is catching up to fundamentals. Unfortunately many small investors are leaving the market, which is good from a contrarian standpoint. Liz Ann pointed out nearly an equal amount of money is being pulled out of Mutual funds as went in the first quarter of 2000. She thinks this is a good sign. Sonders said to buy quality companies and is encouraged that institutions are starting to buy. When hedge funds start covering short positions the market should grind higher. Liz Ann likes quality technology companies like Microsoft (MSFT), Dell Computer (DELL), First Data (FDC), as well as Johnson & Johnson (JNJ). She would sell Oil companies if prices spike during a war and lighten up on the Utility sector.

Nick Sargen is happy consumers didn’t capitulate a few months ago when many feared they would. Nick thinks if we do get a drop in unemployment next year the economy will gain momentum. Sargen encourages diversity globally and thinks China has some interesting opportunities as well as emerging Asia. Stocks he likes now are Samsung MBNA (KRB) and Wendy’s (WEN).

Mike Holland thinks Tech will continue to lead but concedes it maybe ripe for a pullback. Some of Holland’s core holdings are IBM (IBM), Microsoft (MSFT), Intel (INTC) and he expects them to continue to do well. Mike thinks the economy will do well due to huge gains in productivity made possible by over investment a few years ago. Holland would sell Goldman Sachs (GS) because he thinks it is over valued and will be in for some tough times ahead.

Lou then introduced Dana Telsey chief retail analyst Bear, Stearns & Company. Since the traditional holiday shopping season is shorter than average she expects sales to increase 2-3% versus last years 5.6% gains. With nearly half those sales coming in the December 15-25 time frame. Hot items this year are Chicken dance Elmo, Nordic sweaters, Shetland coats, and don’t forget SpongeBob SquarePants. Consumer electronics will be hot and especially DVD and MP3 players. Dana thinks retail stocks will have their ups and downs near term and being selective is important. Some of her favorites now are Bed Bath & Beyond (BBBY), Coach (COH), Wal-Mart (WMT), Kohl’s (KSS), Tiffany (TIF), Limited (LTD), and TJX (TJX). Telsey looks for either a business that has room to add new stores or a mature company that can attract more customers by being a low price leader. She mentioned she owns none of the companies mentioned to avoid a conflict of interest and her firm has no relationship with any of them. Dana is cautious on strip mall occupants with poor locations or don’t have a niche market. A couple would be Cato (CTR) and One Price Clothing Stores (ONPR). She thinks computer hardware sales will be soft this year but many people will buy software instead.

Liz Ann asked what stores will be the new dominate Mall players. Chico’s (CHS), Talbots (TLB), J. Jill (JILL), Ann Taylor (ANN), and Limited Brands (LTD). Nick wanted to know about International companies. Dana follows the European luxury goods retailers and thinks Gucci (GUC) has room to grow. Mike asked about the future of Wal-Mart. She says Wal-Mart is expanding into the apparel business and competitors will need to have different merchandise, improve quality or be a low price provider to keep up with them.

Telsey said the economy has held up due to low inflation, low interest rates, a tax cut, and low oil prices. Now it appears the job market is stabilizing so she expects personal consumption to pick up early next year. With same store sales up 2-4% and total sales up in the high single digits in 2003. We do have to many stores so those with the right locations or serving a niche market will be more likely to survive. A couple in that category are Hot Topic (HOTT) and Pacific Sunwear (PSUN).

Next week Lou will be cruising the Caribbean so Tyler Mathisen will be guest host. Special guest will Hank Herrmann Chief Investment Officer Waddell Reed.

-- posted by SteveT

Top 583. Dec 7, 2002 7:30 AM

» SteveT - 12-6-02

Tyler Mathisen served as guest host this week and got right to work mentioning the “Rukeyser Effect”. More often than not when Lou takes a week off the markets decline. This week the economic news was mostly benign, sure we had the UAL bankruptcy looming and the usual profit warnings but that didn’t have anything to do with the market action this week, did it?

Gretchen Lash says we were due for a correction, saying the market never goes straight up. We have had much good news since the October lows; the FED has eased, profits are increasing, productivity has increased, and companies have access to cheap capital. Lash sees the market about 30% undervalued if you look at the model Alan Greenspan uses. She sees a good move coming from the markets with the disclaimer that war with Iraq could be holding it back a little. Gretchen would buy companies with exposure to the U.S. economy and it’s productivity gains. She likes Cisco (CSCO) and Oracle (ORCL). Saying these are not just tech picks but plays on the broad based economy including both manufacturing and services sectors of the economy.

Lou Holland is not expecting much by the end of the year. Saying we had a nice run and the market needs time to digest the gains from the past couple months. We may even see a retest of the lows but now is a good time to climb on board. IT spending is still soft but the FED has done a great job according to Holland. The more important thing the FED has done than cutting rates is keeping the money supply up to avoid deflation. Lou is optimistic on Health Care, Technology, Financial Services, and small & mid cap stocks in general.

Elizabeth Dater thinks the market will do reasonably well next year, saying we are in the process of bottoming and we have seen the worst. The economy is starting to turn around and capital spending may pick up next year is her forecast. Dater thinks some tax relief is needed to spur on capital spending. Beth is looking to buy companies that have cut costs, and will see top line growth. A strong franchise with the ability to self finance is desirable too. She likes T. Rowe Price (TROW) and Dollar Tree (DLTR).

Tyler then introduced special guest Hank Herrmann Chief Investment Officer Waddell Reed. Hank sees the resignations of O’Neill and Lindsey as a positive for the markets. The unknown is who replaces the Treasury Secretary. Herrmann thought O’Neill’s problem was saying the right thing at the wrong time. For now Hank sees the market as over bought on a short term basis but over sold on the long term. (E.C. is that a fancy way of saying he expects more volatility?) He expects over the next 5-7 years a market return of 6-8%. He gets there by predicting GDP growth of around 3% adding in low inflation and dividends of a couple percent. If we do get some dividend tax relief he sees that hurting municipal bonds and REITs. Herrmann thinks it is good that companies distribute excess cash to shareholders. Saying companies historically don’t do the best job of using their cash. Sometimes they invest in capital equipment just when demand is about to drop or buy back stock when it is very highly valued. He expects bonds to return coupon and not enjoy any capital appreciation. Hank is not seeing a double dip or return of another recession but does expect slow growth until exports increase. He went on o say exports have the same effect on GDP as durable good and Housing together. Saying he likes stocks of quality and with predictable earnings. His favorite sectors now are Pharmaceuticals, Energy, and Defense. Saying at the end of the interview he likes Pfizer (PFE) and as a contrarian play eBay (EBAY). Saying eBay is like a combination of Wal-mart and Microsoft.

Gretchen asked about earnings and what it is going to take for investors to start believing the numbers. Changes in the accounting profession, they have to many rules and not enough principal. Some backbone by the SEC and maybe most importantly who will be on the oversight committee. Lou said there is $6.6 Trillion in money markets and wanted to know if Hank had any advice for those people. Focus on the long term and dollar cost average into a diverse equity portfolio. Beth wanted his opinion on where we are at working through the excess technology capital spending problem. Hermann said we have improved a little. He went on the say it is not secular or even cyclical but seasonal. Hardware is pretty much commodity based.

Next week Lou will return. Special guest will Tom Laming chief equity strategist The Buffalo Funds.

-- posted by SteveT

Top 584. Dec 7, 2002 9:10 AM

» Kirk - Re: 12-6-02

In response to message posted by SteveT:

Thanks Steve!

For now Hank sees the market as over bought on a short term basis but over sold on the long term.
(E.C. is that a fancy way of saying he expects more volatility?) He expects over the next 5-7 years a market return of 6-8%. He gets there by predicting GDP growth of around 3% adding in low inflation and dividends of a couple percent.

No. If you follow technical analysis, the market is "over bought" in the short term which means the technical indicators are near the tops of their ranges. The path of least resistance is for these indicators to return to mid range or lower before the market can move higher. Those that "channel trade" use these indicators to try to gain return over buy and hold. You've seen me do this with success with LRCX, Agilent and UTEK recently but not with WCOM last year. My point is often the technical indicators are wrong where they can remain over sold or over bought for long periods of time. WCOM was oversold all the way to penny stock land.

So, he is saying we need a short term correction before we can go higher according to the TA he uses.

This URL will give you some TA and indexes that I follow.
http://stockcharts.com/candleglance?VTI,...
Look at the Nasdaq BPI charts on that link and you can see the turns in those off the bottom matched up well with bottoms in the major indexes and that is when I added to my positions in UTEK, Agilent, XLF, LRCX and CACS (between 10/11/02 and 10/15/02). Now that these indicators have hit peak values, you have seen me issue "profit taking" emails to my subscribers. This is all using the "short term TA" which can often be wrong. Most investors are best to look at the long term and forget about the short term unless they do it as a hobby with small portions of their portfolios.

-- posted by Kirk

Top 585. Dec 21, 2002 6:40 AM

» SteveT - 12-20-02

Lou talked about how the markets reacted to a presumed war. Gold and oil prices had a good week while the Dollar didn’t. Stocks and bonds gained after a couple down weeks. Maybe renewed confidence came from the $1.4 Billion settlement between Wall Street firms and regulators? Or maybe it was having tax cuts on dividends back on the front burner with a new Senate majority leader on the horizon. The economy is throwing mixed signals but ending the year on a hopeful note.

Barbara Marcin is hopeful about the economy based on the comments of Alan Greenspan. Barbara is looking for corporate profit growth of 10-12% in 2003 with the stock market exceeding that. Her favorite stocks now are Darden restaurants (DRI). She also likes some utilities and other high yielding stocks due to the expected tax relief on dividends.

Roger McNamee says things are still bleak in Silicon Valley but cost cutting has many companies poised for a better 2003. Roger likes Overture Services (OVER), Concord EFS (CE) Siebel Systems (SEBL) and Cisco (CSCO).

Mike Holland pointed out the Iraq stock market is up 50% in the past few weeks. Indicating it thinks a regime change is on the horizon. In light of new leadership in the U.S. Senate Mike likes Health care companies Pfizer (PFE) and Merck (MRK). Holland also likes Citigroup (C) thinking all this craziness is behind us with the settlement reached this week. He would be a seller of Money market funds, pointing out they are yielding below the inflation rate.

Lou introduced John Rogers Chairman & CEO Ariel Capital Management. John is no longer bearish and is very optimistic on significant gains in 2003 and 2004. He was bearish due to excessive valuation but changed his stance in October when it seemed bad news was everywhere. It got to the point where he heard stories of people not opening 401(k) statements. His criteria for stock selection is as follows; 1. Look for terrific management that creates an environment people want to work in. They should also have the belief that producing a good product or service will lead to long-term growth. 2. Strong balance sheet. 3. A low P/E trading at significant discount to private market value. Some of his current favorite holdings are YUM Brands (YUM) Neiman Marcus (NMGa) and J.M. Smuckers (SJM). Rogers has pretty much shunned large companies favoring his own original research over widely followed stocks. He recommends selling or lightening up on consumer stocks that have done well the past 12-18 months that have gotten a “little expensive”. A couple of these would be McCormick Spice (MKC)and Dial soap(DL). John thinks accounting and earnings forecasts will be conservative going forward and the economy will improve.

Barbara asked if he saw any values in small financial services companies. Many smaller brokerage, Mutual funds, and insurance companies represent excellent values. Roger asked about small Tech companies and if there are values to be had. John usually avoids tech stocks but found one he likes enough to buy. Littelfuse (LFUS) makes small fuses, so small you can shake them out of salt & pepper shakers and Rogers thinks they will do well next year. Mike asked for advice to people holding cash and fearful of entering the stock market. John says it is important to stay invested and not be shaken out. Maintain a well balanced diverse portfolio and look for a veteran manager.

Lou finished asking about the Trent Lott incident and in general what is the state of race relations in the U.S. It was unfortunate but did point out there are still people in this Country that need to move ahead and respect people no matter what race they are. John did say he was helped by affirmative action but he still has to perform.

Next week, the annual festival of black ties and red faces. See which panelist is up 83% YTD. My guess Tom Gallagher.

-- posted by SteveT

http://biz.yahoo.com/p/a/argfx.html

Top 586. Dec 21, 2002 7:18 AM

» Kirk - Re: 12-20-02 : John W. Rogers Jr

.
In response to message posted by SteveT:

More on John W. Rogers Jr
Manager Since: 6-Nov-86

ARGFC: Ariel Fund seeks long-term capital appreciation. The fund normally invests 80% of assets in equity securities with market capitalizations under $1.5 billion. It may invest the remaining 20% in investment grade debt securities. The fund seeks environmentally responsible companies; it may not invest in issuers primarily involved in the manufacture of weapons systems, nuclear energy, or tobacco.

Fund Background
Category Small Value
Fund Family Ariel Funds
Net Assets (N/A) $1.19 billion
Morningstar Rating
Year to Date Return -6.18%

Fees & Expenses
Total Expense Ratio 1.19%
Max 12b1 Fee 0.25%
Max Front End Sales Charge 0%
Max Deferred Sales Charge 0%

Seems to well match my favorite small cap value fund, FLPSX, over the last year.

FLPSX http://biz.yahoo.com/p/f/flpsx.html

I'd say he has done an exceptional job for this market sector. FLPSX has lower annual expenses, but it has a 3% FE load. If you hold over 5 yrs, then the lower cost fund is better as the savings pay the load, but if you switch funds often, then Mr. Rogers' fund is probably cheaper. Over a 5 yr period, they are probably a wash and thus both excellent performers.

FLPSX is maybe 10x the size at $15B so the Ariel fund might have a higher probability of out performing going forward as it only has to find 1/10th as many good, small cap stocks to buy.

Large Chart http://finance.yahoo.com/q?s=ARGFX&d=c&k...

Profile - Ariel Appreciation (CAAPX)

Fund Background
Category Mid-Cap Blend
Fund Family Ariel Funds
Net Assets (N/A) $1.37 billion

Ariel Appreciation Fund seeks long-term capital appreciation. The fund normally invests 80% of assets in equities with market capitalizations between $200 million and $5 billion. It may invest the balance of assets in debt. The fund seeks environmentally responsible companies; it may not invest in issuers primarily involved in the manufacture of weapons systems, nuclear energy, or tobacco.

Fees & Expenses
Total Expense Ratio 1.26%
Max 12b1 Fee 0.25%
Max Front End Sales Charge 0%
Max Deferred Sales Charge 0%

Lead Manager: John W. Rogers Jr.
Manager Since: 30-Sep-02

Just took over management of this fund so past performance was not his responsibility.

-- posted by Kirk

Top 587. Dec 28, 2002 5:45 AM

» SteveT - 12-27-02

Lou opened the Black Tie affair by saying despite the behavior of the economy and markets you have not stumbled into an undertakers convention. After a short review of the years major news and trends that affected the markets Lou got right to work.

Tom Gallagher predicted 12 months from now the Geopolitical risks of Iraq, North Korea, and Venezuela will be less than they are now. He went on to say we should get some fiscal stimulus in the form of a dividend tax cut. Tom is going to be looking at all economic reports the coming year but thinks the moving average initial unemployment claims will be the one to watch. Now it is telling him average growth in the economy and no double dip recession.

Harvey Eisen thinks next year is going to be another tough year. He is most bothered by fear of terrorism in the U.S. For Harvey Interest rates are the thing to watch in 2003. Saying it is hard to imagine them going much lower. There for making other investments incredibly attractive.

Alison Deans is worried about War and terrorism too, and thinks consumers are as well. She thinks that will dampen the economy. That along with fear of job loss has consumers defensive in her view. Like Tom, Alison watches unemployment along with consumer confidence and retail sales as predictors of when economic improvement will take place.

Elizabeth Dater thinks market growth will return to a more normal single digit rate in the year ahead. The big problem now is uncertainty, and the market hates uncertainty. Despite that she encourages people that plan on being around to take advantage and make a commitment to equities. Beth is watching inflation closely. She thinks the fear of deflation is justified but military action could work off the final excess inventories and be a plus for the economy. She also has faith Alan Greenspan will do all he can to avoid deflation.

Lou reviewed year to date numbers we all follow such as major market indices, precious metals, currencies, and several economic reports. Since we have a couple days to go in the year no sense including them here. Then Lou went on to “The List”. It shows most panelists lost money this year but the average loss was less than the S&P 500. The invitations to appear on this show were sent out at the end of November and since then Marty Zweig and Bob Stovall have moved in to 3rd and 4th place.

Tom Gallagher had top honors and makes his second straight year end appearance with a gain on 2002 YTD of 84%. Most of that came as a result in options on Euro futures. Tom predicts a Dow high of 9900 a low of 7600 and a close of 9000. His NASDAQ guess is a high of 1700 a low of 1230 and closing at 1450. Gallagher sees much volatility and modest gains in 2003.

Harvey Eisen had the distinction of having the best performing stock pick, and the worst for 2002. Year to date he has a 3.75% gain. Harvey’s DOW forecast is as follows, High 11,000 low 7300 and closing at 9500. His NASDAQ figures are high 1800 low 1200 and a close of 1600.

Alison did the best of the entire panel at predicting a DOW peak in 2002 at 10,500 while it actually came in some 130 points above that. She also had the low guess closest to reality of 10,000. We all know it came in painfully below that. Deans portfolio is down nearly 13% YTD. Her 2003 predictions are DOW high 9000 low 7600 and a close of 8700. The NASDAQ high of 1500 the low 1200 closing at 1300.

Elizabeth Dater is down a little over 13% for the year, still better than the S&P 500 by about 10%. Her DOW high and close picks were runner up to Alison. Beth predicts the DOW high in 2003 of 9755 and a low of 7520 and a close of 9422. Her NASDAQ forecast is high 1929 a low of 1115 and a close of 1753.

Now for the panel portfolio picks for 2003. All the regular panelist picks will be on this weeks transcript available from Burrell’s at 1-800-777-8398.

Tom Gallagher has a 20% weighting in call options on March 2004 Euro dollar futures, 20% call options on March 2004 Uribor futures, and 20% Short March 2004 Yen. 10% in each of the following; Alliant energy (LNT) Mylan Labs (MYL) Verizon (VZ), and Central European Equity Fund (XCEEX).

Harvey Eisen is taking an equal weighting in Ivax (IVX), ValueVision (VVTV), Leggett & Platt (LEG), Whitman Education (WIX), Bank One (ONE), Citigroup (C), Berkshire Hathaway (BRKa), and Travelers (TAPb).

Alison Deans will go with Pfizer (PFE), AOL Time Warner (AOL), Mohawk Industries (MHK), Banknorth (BNK), Sovereign Bancorp (SOV), General Mills (GIS), American Express (AXP), and Bed Bath & Beyond (BBBY). Saying she thinks of her picks as value plays.

Elizabeth Dater has an equal weighting in 5 of her 2002 picks and 5 new securities. Ten year Treasuries (^TNX), Amgen (AMGN), Newfield Exploration (NFX) Intuit (INTU), TMP (TMPW), Berkshire Hathaway (BRKa), Comcast (CMCSA), Franklin Resources (BEN), Nabors Industries (NBR), and United Health Care (UNH).

Next weeks special guest will be Abby Joseph Cohen Chief Market Strategist Goldman Sachs. Lou also revealed we will be getting a new panelist, saying it is his favorite Wall Street Bear. Will it be Barton Biggs? Nah. Doug Cliggott??? Maybe the return of Gail Dudack? Here is hoping 2003 will be a damn site better than 2002. Cheers.

-- posted by SteveT

Top 588. Jan 3, 2003 12:16 PM

» kevinwaite - Re: 12-27-02 WSW year end

In response to message posted by SteveT:

I would be very happy to split the cost of the year end transcript with anyone, it inlcudes the picks from all panelists. Thanks.
Kevin_Waite@mindspring.com

-- posted by kevinwaite