02/25/2005 12:00 am EST
Few have the global experience of John Dessauer, who began his career as an investment officer at Citibank in Zurich and for the last 20 years has published his Investor's World newsletter. Here, he looks at his current US and foreign favorite stock plays.
"Contrary to many, I don’t expect the dollar to go down very much. By my analysis, the odds are that the dollar—at least relative to the euro and the yen— will end up slightly higher a year from today than it is now. Many analysts will argue with my view. But I’m fine with that. In my experience, being in the minority is usually the best place to be and I’m feeling like more and more of a minority on the dollar. If that forecast is anything near correct, then we won’t have to worry about interest rates going through the roof. This, in turn, will be very good for inflation expectations, long-term interest rates, and the economy.
"With the economy in good shape, profits will likely continue to grow in 2005. My approach is to buy quality companies when Wall Street’s expectations are moderate to low and then be as patient as is required— when the reward comes, it can be enormous. Nokia (NOK NYSE) pays a dividend. It has super management. It has an excellent balance sheet. And its cell phone sales last year grew at 23%. This is still a growth industry and I believe that Nokia will regain their competitive footing and begin to take market share back from Motorola and Samsung. In the meantime, I see very little risk.
"I also like Cendant (CD NYSE), as a play on both the real estate industry and a bet on the travel industry. I'd note that I was on the Phillips InvestorPlace cruise to the Panama Canal last week, and found out that the ship has been sailing full. Americans are traveling again. But they are not going too far from home. Meanwhile, Cendant's strategy is to acquire companies in the travel business, while selling off businesses that are not growing as fast. The company pays a dividends, continues to improve its balance sheet, and is buying back shares. I don’t know when this stock will move higher, but I have a feeling that when it does, it will move a lot higher than expected.
"One bank I like that is focused in the retirement communities of North Carolina and Northern Florida is The South Financial Group (TSFG NASDAQ). I’m impressed by the bank in terms of their balance sheet, their business plan, and in terms of the ratios you would look at in banks. They are not exposed to the textile market. When they make commercial loans, they are making them to the businesses that serve the retirement communities that are growing in these areas. The other thing that impresses me about the bank is its management. For the most part, they are over 50 years of age, and the vast majority of them are over 55. Most of them came out of the Barnett Bank system. While they don’t say it, I would expect that in another four or five years, these guys are going to want to retire. The way to do that is to sell the bank to Wachovia, or SunTrust, or Citigroup. I can almost guarantee that that will be the end game for Southern Financial."