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Top Pros Sound Off
02/06/2008 12:00 am EST
Three leading investment advisers were interviewed on the MoneyShow.com Video Network. Here are summaries of what they said…
Elliott Gue, editor of The Energy Strategist and The Energy Letter, sees near-term pressure on oil, maybe a pullback to the $70s, as inventories start to build, accompanied by lower demand in some countries.
He expects a recession of some magnitude in the US but good growth in the developing world. Gue noted that the outlook for commodities continues to be strong because of the drive for alternative energy, as well as expanding consumption throughout the emerging markets.
Uranium soared from $10 to $130 in the last few years and has now pulled back to the $70s. But the metal continues to have potential, as a result of the planned accelerated growth in the nuclear power industry worldwide. And lastly, he said he is very bullish on coal, which has seen a big comeback in the last few years, because of the huge surge in demand in China and Asia. China is building a new coal plant weekly. His favorite play is Peabody Energy (Nyse: BTU), which has exposure to the fastest-growing coal regions.
Adrian Day, editor of Adrian Day’s Global Analyst,noted that while the credit problems in the US are extremely serious, other parts of the world are growing strongly and are very attractive. With large reserves and healthy savings rates, Brazil, Thailand, and Singapore seem relatively undervalued, he said.
One sector that he likes because of falling interest rates is business development companies, which lend money to small businesses and pass through dividends to their shareholders. The stocks have been completely devastated in the last few months—unfairly, he said—and their yields are currently 9.5% -14%. They also have never cut their dividends. Two that he finds particularly attractive are Gladstone Capital (Nasdaq: GLAD) yielding 9.5%, and Apollo Investment (Nasdaq: AINV), yielding 13.2%.
Day said that he is being very selective right now, looking for good quality at low multiples. A couple of his favorites include HSBC Holdings (Nyse: HBC), a global bank that has a solid balance sheet and healthy dividend yield. He also likes Singapore’s Macquarie/First Trust Global Infrastructure/Utilities Dividend and Income Fund (Nyse: MFD), which holds most of its assets in publicly traded companies.
Jordan Kimmel, president and portfolio manager of Magnet Investment Group, said that one of the problems with a traditional asset allocation plan is that it often requires investors to sell their winners and keep their losers, resulting in mediocre returns. Instead, he believes in starting at the bottom, finding the right superlative companies and sticking with them.
He chooses his investments by quantitatively testing each variable for return and stability of return. His parameters include looking for top-line growth, healthy margins and the acceleration of margins and cash flows. Kimmel noted that too many people get caught up in the economic number of the day. He prefers to search for the best investments and then build a concentrated portfolio of exceptional stocks, which he calls his “magnet” stocks.
One of his favorites at the moment is Cal Maine (Nasdaq: CALM), a company that produces eggs. CALM had a big run during the Atkins and South Beach Diet crazes, and has now found new life in the push to organic foods. The company is posting exceptional revenue growth, has very little debt and dominates its niche, he said.
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