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

Top 773. Mar 27, 2004 6:10 AM

» SteveT - 3-26-34

For the third week in a row Maria Bartiromo filled in while Lou is on the bench after back surgery. Lou last appeared on Halloween 2003, since then the S&P 500 has risen just over 5% and is currently just under 5% its bull market rally high. Why am I telling you this? I had a glitch in recording the show and missed most of Maria’s opening remarks. I did hear Bartiromo review the weeks end price drop in oil, the move upward in gold, silver, and Platinum. She also mentioned news concerning the specific stocks of Microsoft, Tyco, and Dynegy. If I missed any really important news, like when Lou is returning please help me out.

Liz Ann Sonders said what the market does has the biggest impact on investor’s confidence and how they react. January 2004 was the third biggest month ever for Mutual Fund inflows and that is waning, as you would expect. She said the incentive is still there due to low yields on bonds and money market interest very low. Dividend yields are important and are now a higher percentage of the total return. Her stock picks are those expected to surprise on the upside when earnings are released next month include Federated Department Stores (FD), Claire’s Stores (CLE), National Semiconductor (NSM), and Express Scripts (ESRX). All these stocks Sonders would commit new money today at these prices. She would sell bonds particularly Treasuries.

Harvey Eisen says things clearly have improved after this healthy correction. Now everything is in place for the bull market to continue. The first Quarter numbers are going to be great and we have never had a down Presidential election year. Eisen likes Liberty Corp (LC), ValueVision (VVTV), Ivax (IVX), WebMD (HLTH), and Johnson and Johnson (JNJ). Harvey too would be a seller of bonds.

Frank Gannon says first Quarter numbers will get people refocused on fundamentals. The economy is growing at around 4% or 5% and earnings should be up at least 16%. Gannon thinks the bad news was priced in by this correction. He doesn’t think the higher price of oil will impact our economy now as it would have when we were GDP was plodding along at 1% or 2%. Stocks Frank likes are Caremark (CMX), Waste Management (WMI), and Cisco Systems (CSCO). He would sell Bristol-Myers Squibb (BMY)

Maria then introduced Christopher Williams, Chairman & CEO Williams Capital Group. Chris says we have seen a great deal of volatility and that is likely to continue the remainder of the year. Positives for the market are the low interest rates and the stimulus that provides. Negatives are a weak currency, energy prices, the jobs picture and how that affects psychology, and terrorism threats. All these contribute to volatility. When picking stocks Williams looks out beyond 18 months. Stocks he likes now are FLP Group (FLP) and Dominion resources (D). Maria asked how Chris picks stocks. First he looks at sectors he believes will do well. Then he looks for quality management, how they are positioned within their peer group, and accuracy of their forecasts to give an idea how disciplined they are.

Liz Ann asked if part of the decision making in stock selection is dividends. Yes, dividend yield is attractive and helps reduce volatility. She then wanted to know what prompted Chris to start a money market fund when rates are so low. The whole process started several years ago when no one thought rates would go this low. It has worked out since much corporate cash is being held in money markets because they haven’t been hiring, spending on capital equipment, or making acquisitions so there is a large pool of cash. Harvey said at some point rates are going to rise so what do you do with your fixed income allocation. Stay short on duration, a lot will be determined by the jobs situation and how that relates to productivity and economic growth. Harvey then asked what could go wrong to derail the markets. Chris said a terrorist strike in the U.S. would cause a short term pullback but it is impossible to know how to invest in light of that. Frank asked for William’s thoughts on investing in Health Care. He likes the larger managed care companies where scale and cost effective operations matter. He likes United Health Group (UNH), Anthem (ATH), and Wellpoint (WLP). Then Frank asked about the oil sector and the seasonality associated with it. He looks at refinery capacity since no new refineries have been built in twenty years. For now when oil prices are high he isn’t seeing and new exploration to speak of. They are accumulating cash.

Next weeks guest will be James Paulsen, Chief Investment Strategist Wells Capital Management. The panel has yet to be namedLouis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser

-- posted by SteveT

Top 774. Apr 3, 2004 6:22 AM

» SteveT - 4-2-04

Michelle Caruso-Cabrera sat in for Lou talking about March madness and how it spilled over into April. The week ended with the major market indices completing their strongest week since October. The jobs report did seem to stimulated the stock market at the expense of bond prices and fears of rising rates coming sooner than many anticipated. Michelle also dutifully mentioned the Tyco mistrial, the DOW reshuffle, expensing stock options, and the cost of gasoline. Oh yes and maybe the biggest news of the week, the “marriage” of Bob Dylan and Victoria Secret. smile

She ended her monologue with “The Times they are a Changin’”

Nick Sargen said about a month ago bondholders capitulated thinking rates would remain low. Then stocks sold off and bonds rallied. Something not seen since last year when the Iraq war began. The question now is are we going to see steady jobs growth? Nick thinks we have turned the corner and will see moderate jobs growth going forward. Nick is looking to upgrade his portfolio to stocks that will pay you to take risks. He likes General Electric (GE), McKesson (MCK), and Amgen (AMGN). He would lighten up his holdings of Ingersoll-Rand (IR).

Barbara Marcin says the recovery is broadening out. The jobs report and strong PMI numbers encourage her. Stocks she likes now are Hewlett-Packard (HPQ), and Microsoft (MSFT). Marcin would avoid Sun Microsystems (SUNW). She did say financials maybe flat for a while but should be good investments the next 1-3 years.

Ed Brown thinks the recovery is strong and has legs. There still are things to worry about like the weak Dollar and Middle East. He thinks the fundamental drivers are in place for a very good stock market. His stock selections are looking for solid earnings potential over the next year or so and not being too richly priced. He likes Texas Instruments (TXN), Checkfree Corp. (CKFR), and Investor Services (IFIN). He is lightening up on companies that have gotten ahead of themselves fundamentally, like Sepracor (SEPR), Sprint PCS (PCS), and Biogen Idec (BIIB).

Michelle introduced James Paulsen, Chief Investment Strategist Wells Capital Management. Jim says what is not to like? We have low rates and inflation. GDP and earnings are good. Now the jobs picture is looking better. He thinks there is more pessimism than there should be. He believes rates are going up but so is the stock market. Over the past five years when rates dropped so did the market and when rates rise so does the stock market. He sees no reason why that pattern won’t continue. Jim is not too worried about oil prices. Paulsen believes the benefits of re-inflation are more beneficial than detrimental. He doesn’t like cash at this low rate, thinking you can do a lot better in stocks. Stocks he likes now are Cisco (CSCO) ExxonMobil (XOM), and General Electric (GE).

Nick asked for a bond yield forecast and his logic behind it. Jim see the top of this cycle going up to a ten year (Treasury) yield of 5.5% to 6% and it may come this year. The concern is the market quickly heading towards the fear of inflation. He doesn’t know if inflation is going up that much but a move in core CPI up to 2% would be more than enough to scare bond investors to demand higher yields. Barbara said in light of the good PMI numbers this weeks does Jim think the Industrial sector have this recovery priced in. No, he thinks this cycle will be longer due to the weak Dollar and improving trade. Ed said cyclicals have done well of late and wonders if a change in market leadership is at hand. The past couple months did see a shift to defensive stocks. Now with this jobs report and more optimism Jim thinks we will see a shift in leadership back towards cyclicals. He thinks tech should lead the way with a nice run the next Quarter or so.

Next weeks guest will be Tobias Levkovich, U.S. Equity Strategist, Smith Barney Citigroup. The panel will be Frank Cappiello, Beth Dater, and John Kim.

I'll be taking next week off. Let's hope we get a surprise returning host before I return. Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser

-- posted by SteveT

Top 775. Apr 17, 2004 7:07 AM

» SteveT - 4-9-04 Stock Picks

April 9, 2004
Special Guest:
Tobias Levkovich, U.S. Equity Strategist, Smith Barney Citigroup
1. Anthem (ATH)
2. Gillete (G)
3. Apache (APA)
Panelists:
Frank Cappiello, Chairman, Montgomery Brothers, Cappiello LLC
1. iShares MSCI-Japan (EWJ)
2. Arch Capital Group (ACGL)
3. Harley-Davidson (HDI)
Beth Dater, Senior Portfolio Manager, Forstmann Leff Associates
1. Medicis Pharmaceutical Corp. (MRX)
2. Zebra Technologies (ZBRA)
3. Isle of Capri (ISLE)
John Kim, Prudential Retirement Specialist, Cigna
1. Sun Microsystems (SUNW)
2. Apple Computer (AAPL)
3. Ameritrade (AMTD)

-- posted by SteveT

Top 776. Apr 17, 2004 7:08 AM

» SteveT - 4-16-04

Maria Bartiromo filled in for Lou and reported investors seem to be worrying about good news and corresponding higher interest rates. We had several good news reports on earnings, retail sales, and stronger manufacturing. Some even believe an up tick in inflation is good news when not long ago we were concerned about deflation. All this news combined to elevate the ten-year Treasury yield to just below 4.4%. Oh, yes tax day came and went also this week.

Gretchen Lash is not worried about interest rates moving higher, she thinks the fears are over blown. Lash believes the tax stimulus will peak the first half of this year and the economy will grow at a slower pace the second half of 2004. Gretchen does expect the economic expansion and bull market to continue and recommends the following stocks; Corporate Executive Board (EXBD), Tribune Company (TRB), and Dell Computer (DELL).

Richard Bernstein is not overly worried about rates. The economy is extremely leveraged to interest rates. He believes housing and refinancing may slow some but we are not in a secular bear market for bonds. Earnings are strong now but Rich expects them to slow later this year so he is picking defensive stocks like consumer staples, health care, and Utilities. His picks are Johnson & Johnson (JNJ), Eli Lilly (LLY), and TXU Corp (TXU).

Kim Goodwin says inflation is moving from very low to moderate and see believes investors are to some extent over reacting. The return of pricing power is going to help some companies so it is not all bad news. Stocks she likes now are CONSOL Energy (CNX), American Power Conversion (APCC), and Allstate Corp. (ALL). She would take profits on strength on Machinery Companies due to the expected P/E compression as rates rise.

Maria then introduced Bryan Olson, V.P. Charles Schwab Investment Research. Bryan has conducted research on investment strategies, risk reduction, and taxes for Mutual Funds. His recommendation is to pick the best funds for the highest pre-tax return. Then overlay taxes. He does this by looking at past tax efficiency and cash outflows as a guide to future tax inefficiencies. If you do decide to sell a fund to avoid a taxable distribution know where that money is going, or don’t let the tax tail wag the investment dog. Olson thinks the next 10-20 years returns will not be what they were the past 20 years so even with lower tax rates the tax bill will still be significant. Tax efficient funds fall into four categories 1) Underlying philosophy namely index funds 2)Tax managed funds 3) Tax Aware funds 4) Current circumstances, now many growth funds have capital losses on the books to carry over from the bear market. They may have enough to off set gains for the next couple years. Schwab has a favorable market forecast and based on relative valuation is under weighting bonds by 10% and over weighting growth stocks by 10%, including both small and large caps.

Gretchen asked if Mutual Fund turn over is always a bad thing. No, selling gains to offset a loss is the good kind of turn over and is tax neutral. Gretchen then asked if you should consider timing of purchase or sales of Mutual Funds to maximize tax benefits. Yes, generally look to the calendar and check with the fund to avoid buying a distribution you end up paying the taxes for but never benefited from the gains. Rich asked if there was a style of fund that is more tax efficient. The individual manager drives much of it but research shows value type managers seem to be more aware of the problem and dealing with it and dividends. Rich then asked when looking at a prospectus where would you find tax loss carry forwards. In the annual report and some third parties (Morningstar Schwab) also offer that information. Kim knows Bryan uses a proprietary model that uses quantitative screens to identify tax efficient funds. She wanted to know he adjusts that for qualitative issues like the scandals at some Mutual Fund Families. The quantitative aspects look at the past returns, expenses, and fund size. He does combine that information with the qualitative by talking to the mangers and fund families. He went on to say that one of the scandal benefits is that the late day trading will end and we will see increased transparency and competition on all levels. Kim Then brought up trying to time the market by getting into and out of funds to try to maximize returns and asked if he would recommend that kind of activity. No, not at all Bryan said market timing is a very difficult game to get right. You miss a couple calls and you destroy a great deal of wealth creation ability. Mutual funds are intended for long term investing.

Next weeks special guest will be Dan Rice, Portfolio Manager, State Street Research Global Resources Fund. He will be talking about small and micro cap energy stocks. The panel will be Ed Brown, Barbara Marcin, and Nick Sargen.

Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser

-- posted by SteveT

Top 777. Apr 17, 2004 7:44 AM

» Kirk - Re: 4-16-04

.
In response to message posted by SteveT:

Thanks Steve.

For a canned reply (I believe they rehearse or have questions asked in advance) I thought this was a rather poor reply:

"Gretchen asked if Mutual Fund turn over is always a bad thing. No, selling gains to offset a loss is the good kind of turn over and is tax neutral. "

At first order, if you have a loss to match every gain, then your fund is NOT going up. You might have "good turnover" but I'd prefer a fund go up in value.

Mutual funds, in a rising market, are wise to sell their losers and take profits to take advantage of the tax matching, which might be what he was speaking of. A portfolio with a very low turnover might actually be even lower if it were not selling its losers and offsetting the loss by taking profits in winners.

Some strategies might have high turnover AND have all winners...

One problem I have with mutual funds is they might sell their losers too quick to get the tax balancing or window dressing rather than add money to buy more of a stock at a better price. Unless the fundamentals have changed on a company, selling after a stock goes down to balance a tax gain can actually hurt your future returns if the stock recovers.

I think it all points to why I like index funds and individual stocks and very few, if any, managed mutual funds in my portfolio. I prefer managed funds NOT pay attention to taxes but reather just maximize gains then I buy them with my IRAs. IF I want tax efficient, then I'll buy an index fund or even more efficient individual stocks

-- posted by Kirk

Top 778. Apr 17, 2004 8:11 AM

» SteveT - Re: Re: 4-16-04

In response to message posted by Kirk:

Kirk, I know what you mean. I think some of the problem is they have a limited time to touch on several points. Perhaps given more time they could do a more though job explaining some of the finer points. I think Bryan did say, “don’t let the tax tail wag the investment dog.”

I have decided personally to own nearly all index funds for both equities and bonds. I did within the last six months establish a minor position in FLPSX in my 401(k) and have just this week started to Dollar Cost Average a tiny bit in VIPSX again in my 401(k). Other than that all my Mutual Funds are indexed. I feel that frees up more time for me to concentrate on my explore portion using individual stocks where I can control when and how much to take for gains, and hopefully not too many losses.

-- posted by SteveT

Top 779. Apr 24, 2004 6:45 AM

» SteveT - 4-23-04

Bill Griffith served as guest host and talked about Jawboning by the members of the FOMC. We all know rates are going up, it seems the FED Governors want to make sure we know rates are going up. All this energy spent had the effect of a rising Dollar and Treasury yields for the week, while the stock market was mostly flat.

Brian Rogers doesn’t think rising rates should be a big surprise. He says rising rates will put a cap on P/E expansion and we have to rely on growing earnings and dividends this year for stock market gains. Rogers went on to say investors shouldn’t be overly concerned about the initial rate hike and he thinks they will move moderately. Brian expects earnings and dividends growth to be around 12%-13% this year. He thinks this is a reasonable environment to invest in stocks versus the alternatives of bonds or money markets. Stocks he likes are Royal Dutch (RD), Union Pacific (UNP), and Marsh & McLennan (MMC). He warned not to overweight Housing and metal stocks.

Alison Deans agrees rates and inflation are going up but relative to the past 15 years both will still be low. Typically when rates rise P/Es suffer and now even without factoring in higher rates P/Es on the market are looking a little over extended. Deans did say companies that can grow earnings very strong would be able to offset increased rates. Sectors she likes are energy, specialty retail, and industrials. Stocks include Coach (COH), Burlington Resources (BR), and Progressive (PGR). Alison is cautious on Financials and Technology.

Laszlo Birinyi said historically when the FED is raising rates it has not been much of a hurdle to the stock market. He sees a flat market absent leadership. Stocks he does like are Countrywide Financial (CFC), Capital One (COF), and Caterpillar (CAT). Birinyi is worried about the NASDAQ especially the smaller secondary stocks that had gains in excess of 200% last year. This was accomplished dues to cheap money and that has dried up.

Bill then introduced Dan Rice, Portfolio Manager, State Street Research Global Resources Fund. Dan says energy prices are up due to worldwide demand increasing. Much of that is coming out of Asia, especially China. He sees that continuing. Another factor is geopolitical uncertainty. Further price increases are going to hinge on consumption growth in China, if they continue at the present pace by the middle of next year they will outstrip the world’s ability to supply them with commodities. It could be a classic boom bust scenario. China is working to decrease their growth rate and he thinks they will succeed. It is possible they overshoot and cause a recession and prices would drop. Dan thinks that would be positive in the near term. Coal is the largest segment he is invested in. He sees plenty of opportunity there, as it is coming out of a twenty-year depression. Rice thinks there is a 50% chance of coal shortages late this year and if not this year nearly a 100% chance of shortages next year. The past year prices are up 70% to 80% as natural gas supplies are stretched, a trend he sees that continuing, which will make us more reliant on coal. Stocks he likes are Consol Energy (CNX), Peabody Energy (BTU), Massey Energy (MEE), and Arch Coal (ACI). Rice also likes Natural Gas oriented companies including Newfield exploration (NFX) and Western Gas Resources (WGR). His biggest worry is that China does not get growth under control.

Brian asked how long it takes to develop new energy supplies and get them to consumers. Generally 3-5 years. The past couple years have seen no new major discoveries so we are living off what was discovered 5 or 10 years ago. The few new discoveries are coming from OPEC Nations so we are going to be more and more dependent on OPEC for at least the next 3-5 years. Brian then asked how he was able to steer clear of getting burned by Enron. It was a macro call on all the merchant traders after checking their credit rating and balance sheets. He thought they were going to lose business to the new players like Morgan Stanley and Citigroup, which had strong balance sheets and AA and AAA credit ratings. Alison asked about alternative energy plays. There are a few smaller companies that are interesting but most of them aren’t going to make money for 5 or 10 years. If traditional energy was fully valued he might start looking at some of them. Alison then asked if he was short any stocks. No, not at all, a rising tide lifts all boats so this is not time to be taking that risk. Laszlo asked for a gasoline price forecast for the summer. If you look only at inventories prices are 40 cents a gallon higher than they should be. Some of it is clean air standards but most of it is psychological fear of decreased supply due to geopolitical circumstances. Laszlo then asked why with coal and oil being up so much the past year isn’t this showing up in the CPI figures. It has to do with the way CPI is calculated these days. 20 years ago energy was 20% of CPI, now it is about 7%.

Next weeks special guest will be David King, Portfolio Manager Putnam New Value Fund. The panel will be Mary Farrell, Tom Gallagher, and Bob Stovall. Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser, Louis Rukeyser

-- posted by SteveT

Top 780. Apr 25, 2004 3:09 PM

» lly01 - Re: 4-23-04

In response to message posted by SteveT:

I saw part of Louis Rukeyser's Wall Street Week on Friday, April 23. I am hoping someone can answer my question about the stocks that guest Dan Rice likes. He mentioned that 2 companies had recently been acquired/bought out/taken over. One of his "picks" was a company who Rice said was the 3rd one that he thought would be bought out. Which company was it?

Thanks!

-- posted by lly01

Top 781. Apr 25, 2004 5:22 PM

» pbradford6 - Re: 4-23-04

In response to message posted by SteveT:

Thanks for your informative weekly posts.

It is becoming increasingly evident that Lou may never regain his health sufficiently to emcee his program. It is very unusual for a person to convalesce this long following back surgery even given his age. I hope I'm wrong and that he'll be around for another decade.

Have you read/heard anything new about his condition?

-- posted by pbradford6