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

» kleslie101 - Steve, thanks a ton for the post on Friday's Wall Street Week

-- posted by kleslie101

» SteveT - 12-12-03

Brian Rogers thinks the market will go higher over the next several months as earnings improve and investor confidence increases. He is looking for stocks that have lagged and will turn into good investments. Examples would be Viacom (VIAb), DuPont (DD), and Marsh & McLennan (MMC). Rogers does hold Exxon Mobil (XOM) and said he would look for cheaper stocks to buy now.

Mary Farrell said Presidential election years are historically very good years and 2004 should be no exception. Earnings are crucial and so far they look great. She says the biggest risk in 2004 is fear over slowing earnings for 2005. Stocks Mary likes now are Schlumberger (SLB), Estee Lauder (EL), and Pfizer (PFE).

Frank Gannon predicts for 2004 a rotation to Large Cap stocks with plenty of free cash flow and high dividend yields to lead the market. He is focusing on stocks that will benefit from an expanding economy. He likes Carnival Cruise Lines (CCL), Goldman Sachs (GS), and Burlington Resources (BR). Frank thinks it is time to take profits on materials stocks that have done well lately.

Tyler then introduced special guest Jim Norris, Partner and Co-manager Cooke & Bieler. Jim says 2004 is going to be the year of quality stocks and to be selective. Tyler wanted to know how he decides what to buy. First look at quality, remember you are buying ownership in a business. Look for balance between quality and what you have to pay. Ask yourself would you buy the whole company. Finally think long term, his average holding period is four years. He is somewhat concentrated currently holding 38 stocks. His current favorite holdings are; Haemonetics (HAE) a manufacture of automated blood collection systems. They have a competitive advantage, predictable sales, barriers to entry, a strong name brand, good distribution, and a strong balance sheet. He also likes Steelcase (SCS) and Big Lots (BLI). They both have strong balance sheets and are market leaders.

Brian asked for the individual investor what is the most important evaluation tool for a stock. Focus on cash flow. Look at the valuation based on discounted cash flow. That is the way to value a business. Mary asked if Jim thought mid cap stocks would begin paying more dividends with the cut in taxes on dividends. Perhaps to some extent, especially for the more mature companies. Jim is more concerned about how they use their free cash flow. If they have a better use to reinvest and grow the business that is better in the long run. Frank asked for his thoughts on cyclical stocks. Norris thinks it is a good place to be in the early stages of recovery. He warned the easy money has been made, from here on out you will need to be selective. Focus on companies that spent the recession improving themselves. Look for companies that came out of the recession stronger than they went into it.

Next weeks Special Guest will be Michele Clayman, Founder and Chief Investment Officer, New Amsterdam Partners. The panel will be Ed Brown, Nick Sargen, and Marty Zweig.

-- posted by SteveT

» Kirk - Re: 12-12-03: Jim Norris, Partner and Co-manager Cooke & Bieler

Thanks Steve.

I really liked that guest Jim Norris. What he said about how to buy stocks and what to look for is very similar to what I believe. He too is "concentrated" (not as diversified as the S&P500)where you get more bang for your buck. Of course, the EMH academics will say we are taking more risk.

A quick look through Fidelity yielded the following:

Cooke & Bieler Large Cap Value Inst CL
Cooke & Bieler Mid Cap Equity Inst CL
Cooke & Bieler Tax Mngd Value Inst CL

All three are NTF (No Transaction Fee) Funds.

Cooke & Bieler Large Cap Value Inst CL (CBEQX)
Top 10 holdinds as of 09/30/2003
MBIA
Eaton
Wendy's International
Big Lots
Hubbell B
Merck
Hasbro
Kimberly-Clark
Bank of New York
Countrywide Financial
29.90% of the portfolio

Cooke & Bieler Mid Cap Equity Inst CL (CBMDX)

Top Ten Holdings 3 as of 09/30/2003
Haemonetics
Big Lots
Zale
Parametric Tech
CBRL Group
Viad
Aon
Hubbell B
Steelcase
Carlisle Companies
39.40% of the portfolio

Cooke & Bieler Tax Mngd Value Inst CL (CBTAX)

Top Ten Holdings 3 as of 09/30/2003
Eaton
MBIA
Wendy's International
Big Lots
Merck
Hubbell B
Kimberly-Clark
Bank of New York
Dover
McDonald's
30.07% of the portfolio

lets see expenses for his tax managed portfolio
Fees & Loads
Transaction Fee: No
Breakpoint Pricing: No
Maximum Redemption Fee: 1.00%
Redemption Fee Time Reduction: Yes
Management Fee 0.47%

Expenses
Expense Ratio as of 10/31/2002 1.25%
(I think they reduce this so the total is 0.47% but I'd look into it first.)

IMPRESSIVE 3 & 5yr results!

<img src=http://pvcharts.quicken.com/images/chart... width=470 height=250>

<img src=http://pvcharts.quicken.com/images/chart... width=470 height=250>

Year-to-date:
 
  Date       Kirk    S&P500   Delta
2003 YTD    +74.6%    24.1%    50.6%  as of 12/13/2003 
 

Total Return:
                                 Kirk   S&P500+  NASDAQ 
4.75+ Yrs 12/31/98 to 12/13/03  167.7%  ( 6.3%) (11.1%) 
Annualized Annual Return         22.0%  ( 1.3%) ( 2.3%)  
 
  
9/30/98 Inception Value:   $100,000
9/30/03 5 yrs later value: $345,395 up 245.4%
S&P500 between 9/30/98 and 9/30/03: up   4.6%
With dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter 
Suitable for the aggressive growth part of your 
diversified investment portfolio. 

-- posted by Kirk

» SteveT - 12-19-03

Marty Zweig says the market has come along way but sentiment is overly optimistic and that worries him. On the positive side earnings are terrific and we are coming into a historically seasonally strong period. Marty is bothered by high valuations and he thinks the FED should raise rates. When asked by Griffeth if the FED will raise rates he said, “Will the FED raise rates? I don’t know why they wouldn’t. They say they aren’t going to, but this economy is very strong. I think it is ridiculous to keep rates at 1%. But that’s me, not the FED.” Despite that Marty likes stocks that are interest rate sensitive such as Countrywide Financial (CFC), Pulte Homes (PHM), Centex (CTX), Ryanair Holdings (RYAAY). He also likes Amgen (AMGN).

Nick Sargen said 2003 was the year to live dangerously. 2004 should see the economy grow four or five percent and corporate profits continue to improve. He doesn’t think the FED will raise rates in the first half of next year. He does agree that a lot of good news is already priced into the market. Sargen thinks the U.S. Dollar will continue to slide but it will be benign. He likes General Electric (GE), Masco Corp. (MAS), Valero energy (VLO), and McKesson Corp. (MCK).

Ed Brown likes the macro economic environment. The economy was hitting on almost all cylinders and now it looks like the jobs picture has brightened so we are off to the races so to speak. Brown thinks the market is reasonably valued considering low inflation and interest rates. Ed likes Panera Bread (PNRA), Boston Scientific (BSX), and Kohl’s (KSS).

Bill then introduced special guest will be Michelle Clayman, Founder and Chief Investment Officer, New Amsterdam Partners. Michelle is a Growth At a Reasonable Price (GARP) investor. She says there are opportunities in every sector now but they are getting harder to find. She questions the quality of the market leadership. The past year lower quality and high beta stocks have had the best returns. They do not qualify for GARP status today. Clayman expects 2004 to change and the old economy stocks with visible cash flow to lead. She expects the FED to keep rates flat most of next year but they might start creeping up towards the end of the year. Stocks she favors now are; Analog Devices (ADI). They have the advantage of strong demand for both digital and analog chips and they make both. Their capacity utilization and margins are improving. They have strengthened their balance sheet by paying down debt. Stock buy backs are possible too. She also likes Barr Laboratories (BRL) saying the recent sell off was unwarranted. They also have “a terrific pipeline”. Another stock that had a recent sell off is Corinthian Colleges (COCO). Trading was even halted for a time. She also likes Estee lauder (EL) as more than half of its sales come from overseas. The weak Dollar should benefit it, as they sell many products in duty free shops. Michelle also likes Pulte Homes (PHM) it is off it’s highs due to fears of higher interest rates, it has a low multiple and has yet to hit peak earnings. She thinks housing demand will remain strong.

Marty asked about a study Clayman did on stock returns of companies and their tax rates. It turns out a lower tax rate is a sign the company isn’t making much money. She considers a low tax rate a red flag. Marty also asked about the price of oil and if that could create some opportunities in some stocks. She is worried high oil will act as a dampener on the market. For now there is much good news so high oil will not stall the market by itself. Nick asked for her sell discipline. She uses a quantitative model to calculate an expected return when purchasing a stock. She buys when the expected return is high. As the stock price goes up the expected return is decreased. When it reaches a point where the expected return is no greater than the broad market she sells. Nick then asked what if we have a replay of the late 90’s and tech continues to lead, will there be a point where it would be time to avoid tech. Michelle tries to have representation in all areas, if that happens she would look to the best names in tech but be under weighted in tech. Ed asked what areas look most attractive now. In the short term cyclical old economy stocks should do well as the strong economic growth continues. She warned tech is over valued and to be careful. Ed then asked about structuring a concentrated portfolio. Clayman does have a portfolio of ten ideas and it is not for the faint of heart. They have an investment committee of analysts each specializing in different areas. This way they do achieve some level of diversity. They select the best of what each has to offer.

Bill asked what she is selling or cutting back on. McDonalds (MCD). Clayman bought it when no one wanted it. They have done well and it could go up from here if they can do in Europe what they did here to turn it around. She also sold St Jude Medical (STJ) saying it is a terrific company that has gone up enormously this year. She sold it due to her sell discipline. Michele thinks the weak Dollar will give Multinational companies and exporters a tailwind in earnings. As the economy picks up raw materials producers could do well too, particularly copper and aluminum

Next week we bring to an end another year. A time to look back with the top four panelists in the annual stock picking contest. When the invitations to this party were sent out at the end of November the top panelists were Laszlo Birinyi at 65.66%, Lou Holland at 65.53%, Gretchen Lash at 62.83%, and Roger McNamee at 55.36%. Please don’t miss this Black Tie celebration and your chance to see what picks the panel makes for 2004. I am sure for all of us the most valuable gift we could receive this year is to see Lou back next week.

-- posted by SteveT

» CapMan - Birinyi's picks for 2004???

-- posted by CapMan

» SteveT - Re: Birinyi's picks for 2004???

CapMan, that was a tough one for me to get too. I thought I heard New York Public Group. I tried to find a ticker but have not had any luck yet. If anyone can help please post. A transcipt is available with all 22 panelist picks at 1-800-777-8398. It will probably take a few weeks. Also perhaps in a day or two the new picks will be available here. http://www.rukeyser.com/tvshow/panelist_...

-- posted by SteveT

» SteveT - 12-26-03

Laszlo Birinyi was the top stock picker in 2003 returning 82.13% year to date. He didn’t expect to do quite so well as most of his picks were dividend plays that he thought would benefit from a change in tax laws. The economic indicator he is watching in 2004 is employment. His top performer for 03 was Yahoo returning 177%, he would sell 25% of that position. The weak Dollar is not going to influence his investment decisions in the coming year. Laszlo’s 2004 picks are Cendant (CD), Coca-Cola Enterprises (CCE), Country Wide Financial (CFC) Freddie Mac (FRE), Sun Microsystems (SUNW), Liberty Media (L), Tenet Healthcare (THC) Washington Mutual (WM), and Western Digital (WDC). New York Public Group is one I am not sure of, I may have misheard it.

Lou Holland’s biggest surprise was how well the lower quality high beta stocks did. He expects the higher quality stocks to lead the way in 2004. He is going to be watching the employment and GDP indicators this year. His best pick for 2003 was Amdocs coming in at 129%. It was beaten down but has good products and a leader in the sector. His biggest mistake was Microsoft. Holland does not worry about the weak Dollar or politics when picking stocks. He looks for a great franchise, great management and to buy them cheap. All but one of his picks for 2004 have under performed the S&P 500 in 2003. That one exception is Country Wide Financial (CFC). The others are Kohl’s (KSS), Pfizer (PFE), First Health Group (FHCC), Viacom (VIAb), Affiliated Computer Services (ACS), Weight Watchers International (WTW), Willis Group ( WSH), and American International Group (AIG).

Roger McNamee was amazed the market powered through the war, SARS and the deficit. The fantastic performance makes him more cautious about 2004. He is going to be watching the employment numbers and interest rates in 2004. His best pick was AmeriTrade up 137%. He thought the market would do well and thinks AmeriTrade is the most efficient and best managed of the on-line brokers. His biggest mistake for 2003 was Concord EFS down for the year 27%, he has sold it. McNamee said not all your picks are going to be right and that is why you diversify and dollar cost average. The one stock he wishes he would have bought is Apple Computer. Roger is not worried about the weak dollar and suggests when trying to evaluate if a news story, be it the election, flu, terrorism or budget deficits, ask yourself if it will be a big story a ear from now. Stocks he picks for 2004 are Seagate Technology (STX), Intuit (INTU), Flextronics (FLEX), Cisco (CSCO), Business Objects (BOBJ), and Motorola (MOT).

Barbara Marcin thinks 2003 was a good year due to improved cash flow and earnings. Perhaps the biggest reason was expanded multiples. She is going to be watching the employment reports for the ultimate sign of confidence of future business expansion. Her best pick in 2003 was Cendant at 106%. It had a bad couple years due to management problems and is a stock she is keeping again this year as it will start paying a dividend. Darden Restaurants was a mistake she sold mid year. She wishes she would have bought more technology stocks for 2003. Marcin is not worried about the weak dollar but does think terrorism is a big concern. Her picks for 2004 are Cendant (CD), AES Corp (AES), El Paso Corp (EP), Honeywell International (HON), Liberty Media (L), First Energy (FE), Dow Chemical (DOW), Wyeth (WYE), Sirius Satellite (SIRI) and XM Satellite (XMSR).

Next weeks special guest will be Abby Joseph Cohen, Chief investment strategist Goldman Sachs. Let’s hope we start the New Year off right with Lou’s return. As stated above a transcript is available at 1-800-777-8398. 2003 or request it via e-mail transcripts@burrelles.com. Year to date returns can be found for all panelists here. http://www.rukeyser.com/tvshow/panelist_... By clicking on each members name it will give you their picks and returns YTD, usually updated at the end of each month. At some point I expect it will be updated with the 2004 picks. Happy New Year and wishing all a prosperous 2004.

-- posted by SteveT

» JeffChristy - Re: 12-26-03

Steve I have the show on tape. I think Laszlo said New Public Group. After searching both Yahoo Finance and Google, I can't find the symbol. I even tried Nu Public.

-- posted by JeffChristy

» JeffChristy - Re: 12-26-03

Steve

I think I have finally figured out Laszlo's mystery stock. While he said new public group I think he meant to say Interpublic Group (IPG). I did a google search on "laszlo birinyi public group" and came up with this:

:http://www.vankampen.com/products/uit/BE...

It contains stocks he liked in October and Interpublic Group was one of them. There are a few others that were also on his list last Friday.

-- posted by JeffChristy

» SteveT - Re: Re: 12-26-03

Thanks Jeff. Looks right to me, and is confirmed here. http://www.rukeyser.com/tvshow/guestsnpa...

-- posted by SteveT