Trading is not a game of exacts. Perfectionists need not apply. Markets are made up of many irration...
The Forbes Roundtable
02/20/2004 12:00 am EST
We conclude our World Money Show Highlights with the Forbes Roundtable, hosted by Matt Schifrin and featuring nanotech expert, Josh Wolfe; market historian Jim Stack; fundamental analyst, Dennis Slothower; and value expert, John Buckingham.
(For more information on the advisors below, please click on their photo.)
"Last December, I was one of the few people in the Oval Office with President Bush when he signed the $3.7 billion for nanotechnology bill," says Josh Wolfe, editor of The Forbes/Wolfe Nanotech Report. "And the very first question to ask is what companies that money will impact. The stocks that we like right now are the ones who make the picks and axes for the industry. Regarding of their claims you can look at their balance sheet and their income statements and you can see there is real, growing revenues as a result of nanotech funding. The first place they put their money is into the academic institutions around the nations. And the first things those institutions will do is buy equipment that allows them to work at the nanoscale- manipulating individual atoms and molecules. The companies we like in this area are Veeco Instruments (VECO NASDAQ) and FEI Co. (FEIC NASDAQ). They make very arcane sounding equipment, like atomic force microscopes. These products have very high margins. These firms have deep market shares; they almost have a monopoly. We like these companies a lot for the next few years, as this government money flows into academia, and then into these companies' pockets."
What does the election year portend for the stock market? Jim Stack, editor of InvesTech Market Analyst, says, "Historically, one of the sectors that made the strongest shift was technology-which went from being one of the leaders in the pre-election years to one of the laggards in the election years. So this would be a good time to start taking some of those profits and increasing your exposure to the more defensive sectors, like energy and raw materials. Another sector that tends to do well in an election year is healthcare. One of the companies we like now is Renal Care (RCI NYSE), which operates kidney dialysis. The company has 14% revenue growth right through the recession. It has a p/e ratio of 21- that's 20% less than the S&P 500. Another one is Dentsply International (XRAY NASDAQ), which provides products to the dental industry. Again, this company is very resilient against recessions and interest rate moves. It has shown double-digit growth and has a p/e of 19. On the more conservative side, among good dividend-yielding stocks, we like Conagra Foods (CAG NYSE), which has a 4% dividend yield. Waste Management (WMI NYSE), I think, is a good turnaround situation. It has a p/e ratio down around 16, and close to a 3% dividend yield. I also like the resource sector. Encana Corp. (ECA NYSE) is one of the largest natural gas and exploration firms in North America. Another one that we like is Devon Energy (DVN ASE). If you wanted to take a diversified position in energy, look at the Vanguard Energy Fund (VGENX)."
"One stock we like that is doing really well right now is Chiquita Brands (CQB NYSE)," says Dennis Slothower, editor of Stealth Stocks. "I think that this is a company that is well discounted in terms of its real value. I think it's a company that could double over the next couple of years. Its earnings have risen 59% over the last nine months. Net income from continuing operations have grown to $89.3 million vs. a loss of $156 million. So this is one that I think could really reward investors quite well. Bananas are a health-oriented food, and given the trends toward healthier eating, I think this is one stock that deserves a real close look."
"I don't pay much attention to the technical indicators," says John Buckingham, editor of The Prudent Speculator. "We've been fully invested for 26 years and made 21% a year on average. We don't try to time the short-term moves. Specifically, we like the homebuilders. If you took away what the company did, and said perhaps that they made routers or nanotech, they would be trading at 50 times the current price. There are companies in this industry that are growing at double-digit rates and I would argue are likely to continue to grow through 2010, due to such favorable industry factors as a shortage of land, economies of scale, and acquisitions. D.R. Horton (DHI NYSE), which has grown earnings and sales in each of its 26 years. Take that Cisco! No technology stock has matched that kind of record. The p/e is nine, growing at 15%-20% a year. Yes, if interest rates spike up to double digits, it will be a negative. But I don't see that happening. Mortgage rates are at six-month lows. The homebuilding sector in my opinion offers some of the best value in the market, as well as the best growth potential. To me that's a double dose of good news and a reason why you should certainly own homebuilders such as D.R Horton, as well as others such as Beazer (BZH NYSE) and Standard Pacific (SPF NYSE)."
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