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

» SteveT - Re: Re: 4-16-04

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

» SteveT - 4-23-04

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

» lly01 - Re: 4-23-04

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

» pbradford6 - Re: 4-23-04

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

» JeffChristy - Re: Re: 4-23-04

It was Western Gas Resources (WGR). The two other companies that were taken over are Tom Brown and Westport.

-- posted by JeffChristy

» lly01 - Re: Re: Re: 4-23-04

Jeff....thanks so much!

-- posted by lly01

» Kirk - Dan Rice Stock Picks

lly01: 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?

JeffChristy: It was Western Gas Resources (WGR). The two other companies that were taken over are Tom Brown and Westport.

He was a good guest. I enjoyed hearing what he had to say.

Special Guest: Dan Rice,
Portfolio Manager, State Street Research Global Resources Fund

His Stock Picks:

1. Consol Energy (CNX)
2. Peabody Energy (BTU)
3. Massey Energy (MEE)
4. Arch Coal (ACI)
5. Newfield Exploration (NFX)
6. Western Gas (WGR)

Here is a chart of these picks vs. the Energy Spyder:
<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

They have done VERY well.

These fund managers are not dummies. My big fear is they tout stocks they are heavly invested in due to recent great performance and they want to take profits. Is there anything preventing them from comming out and talking about their largest holdings in a favorable light then "taking profits" into any added interest?

Being they are not dummies, I very much doubt they would tell us what stocks they were currently accumulating.

And this chart will show how they do going forward (for our records). I bet his smaller cap picks will get quite a pop today after his recommendation.

<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

I wonder if his fund is required to hold these small caps for any period of time after recommending them on national tv? I'd sure love to recommend CACS and GEOG to a national audience...

<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

PERIOD Total Returns   Kirk’s   W5000  S&P 500 Nasdaq
                         NL     VTSMX   VFINX   ^IXIC
1 Year to 3/31/04      +70%    +40%    +35%    +49%
3 Year to 3/31/04      +37%     +8%     +2%     +8%
5 Year to 3/31/04     +102%     +2%     -6%    -19%

 

Total Return:
                           Kirk   W5000 S&P500 NASDAQ 
5 Yrs 3/31/99 - 3/31/04   +102%   +1.6%  -6.2% -19.0%
Annualized Annual Return +15.1%   +0.3%  -1.3%  -4.1%
 
Click for a free issue of my newsletter 
Suitable for the aggressive growth part of your
  diversified investment portfolio. 

-- posted by Kirk

» SteveT - Re: Dan Rice Stock Picks

One day returns.

SPY –.14%
XLE +.56%

CNX +3%
BTU +2.6%
MEE +2.7%
ACI +.54%
NFX +1.45%
WGR +.91%

-- posted by SteveT

» JeffChristy - Re: Dan Rice Stock Picks

Kirk

"These fund managers are not dummies. My big fear is they tout stocks they are heavily invested in due to recent great performance and they want to take profits. Is there anything preventing them from coming out and talking about their largest holdings in a favorable light then "taking profits" into any added interest?
Being they are not dummies, I very much doubt they would tell us what stocks they were currently accumulating."

Ok now that we looked at the stocks that were recommended last Friday, I will take a stab at what will be discussed this coming Friday. We know that the guest will be David L. King. manager of the PUTNAM NEW VALUE FUND

:http://finance.yahoo.com/q/hl?s=PANVX

Here are his top ten holdings which make up about 1/3 of his portfolio. I am willing to bet he talks about stocks on this list.
 
TYCO INTL TYC
EXXON MOBIL XOM
FANNIE MAE FNM
CITIGROUP C
BERKSHIRE CL BBRKb
US BANCORP USB
HEWLETT-PACKARD HPQ
WELLS FARGO & CO WFC
UNION PACIFIC CP UNP
ALTRIA GROUP MO

-- posted by JeffChristy

» SteveT - 4-30-04

Tom Gallagher looks at the macro view and said we did have a lot to digest this week. Perhaps the most important was the fear of the FED tightening. He thinks the soonest tightening will begin is August. When is not all that important but how far they go is. Tom predicts both the stock and bond market will be unsettled until we know just how far rates will increase. Gallagher thinks the FED will be looking more closely at the jobs picture than prices and is encouraged to see some commodity prices drop on the news that China will be bumping up rates.

Mary Farrell also believes the first the increase will not be until August but the risk is it could be sooner. I had a technical glitch so I missed some of Mary’s comments but strong earnings encourage her, but she worries about just how far rates will rise and the Iraq situation. Farrell thinks the April jobs report will confirm an improving employment market. She is being a little defensive in a market that essentially flat on the year. A couple stocks she likes are Colgate-Palmolive (CL) and Clear Channel Communication (CCU). See Lou’s web site for her other picks. http://www.rukeyser.com/tvshow/guestsnpa...

Bob Stovall had thought the FED would not tightening until after the elections in November. Now he is changing his mind. He believes they may nudge rates up a little early on and then hold until after the election or early next year. This is due to the gap between the Fed funds rate and the GDP. Bob is worried inflation could be with us for sometime due to energy costs. In this type environment Stovall likes the sectors of consumer non-durable, health, energy, and as an inflation hedge Gold. Stocks include Clorox (CLX), Devon Energy (DVN), and Outback Steakhouse (OSI).

Sue then introduced David King, Portfolio Manager, Putnam New Value Fund. David starts by looks for big established companies will revenues in excess of $1Billion during the past twelve months. He pays little attention to Market Cap, saying the lower the better. He uses a quantitative research model to screen stock ideas and to optimize his portfolio in hopes of selecting stocks that will have a big impact on his portfolio. Sue asked for an example of how that works. King uses historic data and looks for upside to fair value using his firms research analysts. From there ideas are ranked and finally they diversify across industries to reduce risk. It is a bottom up process spending little time looking at the broad economy.

Tom asked how King copes with accounting controversies since some of his top holdings have been at the center of that issue. David recommends looking at cash, if they report earnings but don’t have any cash that is a red flag. Companies that are turning around have a tendency to show improving cash and little in the way of earnings. Check the balance sheet and cash flow and let the earnings fall where it may is his motto. Tom then wanted to know why large Pharmaceuticals were not large positions in his portfolio. He does own some selected stocks but is not impressed with the overall outlook for some of the bigger names. He does like the drug distributors and mentioned he does own Abbott Labs (ABT) and King Pharmaceuticals (KG). Mary asked if dividends factor into his stock selection. Indirectly, he owns many companies that have excess cash and with the change in tax laws are starting to increase dividends. Going forward dividend growth could be a key factor to stock performance. Bob asked if David employed a seasonality strategy. Seasonality is not something he focuses on but if the price drops due to seasonality David will take advantage of it and buy.

Sue asked why he does not shy away from controversy stocks like Fannie Mae and Freddie Mac. At the moment he thinks Fannie Mae is a value stock with a good history and the headline risk is not as important as where the numbers will be long term. Xerox is another turn around story that could do well given a new product line. Sue then asked if he dabbled in Biotech stocks. Any industry could qualify as a value industry if the criteria are right but right now Biotech and Internet Stocks do not fit the bill.

Next weeks special guest will be Margaret Patel, Portfolio Manager, Pioneer High Yield Fund. The panel will be Ed Brown, Michael Holland, and Liz Ann Sonders.

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

-- posted by SteveT