"Street Critique"-With Dick Green, president of Briefing.com
Wednesday, October 25, 2006PAUL KANGAS: Waiting for that Fed decision, tonight's street critique guest says those same investors just aren't paying enough attention to an earnings season that he's calling remarkable. Joining me now to talk about those corporate results and how they might play into an investment strategy is Dick Green, president of the financial information web site briefing.com. And Dick, welcome back to NIGHTLY BUSINESS REPORT.
DICK GREEN, PRESIDENT, BRIEFING.COM: Thank you very much.
KANGAS: Your brief opinion of the Fed's decision.
GREEN: It's bullish. There is little change in the Fed policy statement and that means good news for the stock market. Fed policy is on hold.
KANGAS: Do you think that they are holding where it is now because they see an economic slowdown coming?
GREEN: They've talked about moderate economic growth and that's what we see. They are looking at that and lower energy prices helping core rates in inflation come down. So there is no reason for them to raise rates at this time.
KANGAS: All right. Now let's get back to your believe that third quarter corporate earnings are to some point unappreciated.
GREEN: They are getting a lot of attention but these really are fantastic reports, particularly from the large cap stocks. For the S&P 500 in aggregate, we are looking at 19 percent earnings growth now for the third quarter over the same quarter last year. And that's on top of a 14 percent gain the prior year. So we are seeing some fantastic numbers spread across most sectors.
KANGAS: A good bull market cannot rest on its laurels. So we are talking third quarter, that's history. What about the fourth quarter?
GREEN: That's one of the best things with these reports we are getting, very fewer earnings warnings from companies. So we are looking at fourth quarter earnings growth that's going to be the 14th straight quarter of double-digit gains. We might be looking at 10 to 12 percent in the fourth quarter as well. The outlook is very good.
KANGAS: What sectors do you think will do the best?
GREEN: Energy has been putting up some great numbers lately, but we are also seeing financials, industrials and technology sectors now start to show some good earnings growth and we expect that to continue particularly in the financial sector.
KANGAS: But you see a lot of money coming out of mid cap and smaller cap stocks into the big blue chips.
GREEN: Well, frankly there might be a lot of money going in across the board, but we do like the large cap stocks now with a slower economic growth scenario, the risk/reward ratio on a lot of these large caps look very good and we saw some great numbers from the mega-cap stocks this quarter.
KANGAS: What are maybe two or three of your favorites? We just have about a minute left.
GREEN: Well, Bank of America is one I mentioned last time.
KANGAS: Uh-huh.
GREEN: We still like that a lot. We do like GE. It's not going to take off on you any time soon but it's a good high-quality stock. Intel is a stock in the technology sector in the mega-caps that we also like.
KANGAS: They have all been just kind off sitting on their hands for a long time. Do you think they are ready to break out on the upside?
GREEN: Yes, sir. In fact, some of them have started to do that. Johnson & Johnson as an example is another stock we like.
KANGAS: Do you own any of these stocks personally Dick?
GREEN: I own all four that I mentioned, I believe, yes.
KANGAS: You believe in eating your own cooking right?
GREEN: I own a lot of stocks so it's hard to avoid, yes.
KANGAS: Listen, thanks very much. We really appreciate it.
GREEN: Thank you.
KANGAS: My guest Dick Green, president of briefing.com.
