One On One With Richard Cripps, Chief Market Strategist at Stifel Nicolaus
Monday, June 05, 2006
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SUSIE GHARIB: Joining us now with more analysis, Richard Cripps, chief market strategist at Stifel Nicolaus. Hi, Richard.
RICHARD CRIPPS, CHIEF MARKET STRATEGIST, STIFEL NICOLAUS: Good evening.
GHARIB: So, what was your reaction to what Ben Bernanke said today?
CRIPPS: You know, he didn`t give a lot of clarity as to what will happen and what injected into the market was a lot of uncertainty. Will the Fed tighten one more time or not? And I think that uncertainty is rubbing the emotions raw, the sentiment raw, in the marketplace. It obviously reacted pretty negatively.
GHARIB: It seemed like there was a lot of talk that this now changed the whole scenario of what was going to happen at the June meeting later this month, that the Fed rather than pausing, most likely will raise interest rates. Was that your take-away? Was that your interpretation as you were reading between the lines here?
CRIPPS: I saw a very balanced statement. I know that what attracted the attention is, of course, the hawkish tone on inflation, but there was also a fair amount discussed about the slowdown in the economy, the signs that they`re seeing in terms of the slowing, housing, some of the other business surveys that are showing or pointing to a slowdown. Then the idea of lag, the idea that monetary policy decisions made today are going to have an impact six, 12 months down the road. I think the Fed wants to be careful about tightening too much and putting this economy in a really slowdown into a recession kind of scenario.
GHARIB: Do you think that the selling that we saw today which was pretty significant, do you see it continuing tomorrow and through the week?
CRIPPS: You know, I think that, again we have a pretty sentiment- driven kind of market here. I think that what the market would have or what I would like to see is sort of what I call a gully washer. We certainly had a gully-washer in terms of the market being down significantly. We certainly like to see a little bit more volume to it. So maybe there`s another shoe to drop. It cleans out the sentiment or the sentiment gets exhausted and I think this market begins a stabilization.
GHARIB: So what is your investment approach, given what Bernanke said today and other things going on in the market?
CRIPPS: Well, our view would be that this is again a very highly charged sentiment-driven kind of market. Those are generally good markets in which one should be looking at it opportunistically. Yes, we don`t know where the bottom is going to be, but prices are lower than they were six weeks ago. So I think in this sort of period of trying to find a bottom, that`s generally a good time to be a buyer, so we would lean to the bullish side and be buyers of stocks here over the next -- into this volatile highly charged sentiment-driven market.
GHARIB: So what are the stocks that you are buying right now?
CRIPPS: The most out of favor groups clearly right now are health care and stocks in the information technology area. Investors have really, whatever monies in the markets that have been made is in the materials and energy and precious metals. I think this group here, if we do get an up- leg in the market, I think we`re going to deal with some rotation or investment themes that are different from the ones that got us here. And I think they will be more beneficial to companies with growth and that would be areas such as information technology and health care.
GHARIB: Do you want to name a few of the stocks, your top two or three picks at this point.
CRIPPS: The real industry leaders are the most out of favor in both of these segments. In the case of information technology, companies like Intel, Applied Materials, Dell Computer look very attractive to us. They`re reasonably valued. And again sentiment on them is very negative. We find that to be an attractive point to be buyers. In the case of health care, again, industry leader United Healthcare, which has come under a lot of pressure due to some issues related to corporate governance, Wellpoint, Coventry, those are good names. We think again sentiment is very negative on them. Valuations are very reasonable and with this market uncertainty a good time to be a buyer.
GHARIB: Richard, do you own any of these stocks personally and what`s your firm`s relationship with them?
CRIPPS: I own every one of the stocks that I mentioned in here this evening and we do not have any investment banking relationship with any of the companies.
GHARIB: Richard, thank you very much for coming on the program.
CRIPPS: Thank you.
GHARIB: We`ve been speaking with Richard Cripps, chief market strategist at Stifel Nicolaus.
