"Street Critique" with Kevin Depew, Managing Editor of Minyanville.com
Wednesday, December 06, 2006PAUL KANGAS: Tonight's street critique guest is increasingly bearish on stocks overall, but he says there are still a few select issues worth buying. Joining me now, Kevin Depew, managing editor at minionville.com, a website focused on investor education. Kevin, welcome back to NBR. Good to see you.
KEVIN DEPEW, MANAGING EDITOR, MINYANVILLE.COM: Thank you, Paul.
KANGAS: Why have you become a bear?
DEPEW: Well I've become increasingly bearish because first of all, I'm a technician and I do look at some fundamental input. The fundamental input is beginning to match up with some technicals that are showing warning signs for the market.
KANGAS: Such as.
DEPEW: We saw in November a record insider sales, the highest since 1987 so it's the highest in almost 20 years. Meanwhile you have corporate buy-backs that are at a record pace in 2006, so it appears the insiders are selling to the corporations who really can't find anything better to invest their balance sheet or their cash in than their own stock.
KANGAS: So the corporate insiders are selling out because they think their stock is too high and the corporation itself buying it back because they think it's too low. So who is right? I mean is it perfectly priced then?
DEPEW: Well I wrote this morning that I thought it was overvalued. So when I look at technical measures as well, the stock market just seems very dangerous right now. It doesn't matter if you look at the advance/decline line rati or if you look at say investors' intelligence sentiment data that came out this morning showing the lowest percentage of those who expect a correction at 16 percent in two years. Before that you have to go back to I believe May of 2002.
KANGAS: OK. Now you've brought our viewers three issues that you say are worth buying now. What is your first pick?
DEPEW: The first one is called Petrohawk Energy (HAWK) and it's a little bit of a fundamental play as well as a technical play. By a value measure it's trading at about 1 1/2 times book. It's also in a sector that I like. It's the oil and gas sector which I believe is still in a secular bull market and technically things are looking bright longer term for the stock.
KANGAS: The chart looks like it's got a bottoming pattern. Wouldn't you agree?
DEPEW: I do and I think it is vulnerable short term, but certainly I would want to be a buyer if it came under $12 a share.
KANGAS: How about choice number two?
DEPEW: Applied Materials, a semiconductor stock. You know, it's funny because people used to not be able to get them to talk about anything but technology stocks. Now you can't get them to even bring them up. This is a stock that looks good technically. The sector is out of favor. And longer term I think it's something that I would want to own.
KANGAS: OK and pick number three.
DEPEW: This one is little more of a trading play. It's Deere & Company which broke out today.
KANGAS: Deere had some news. Chairman Robert Lane met with analysts and acknowledged the firm has been approached by a private equity group but dismissed the possibility of a buyout, so why do you like it?
DEPEW: As I said I think it's more of a trading play. Private equities, those groups seem to be snapping up any company that they can find. There certainly is a lot of liquidity out there, but this in my view is more of a trade than an investment.
KANGAS: OK Kevin. Do you own any of these stocks or have any other disclosure to make?
DEPEW: I do. I own shares of Petrohawk and Applied Materials but not Deere.
KANGAS: OK. We have a few seconds for some parting views to our viewers if you'd like.
DEPEW: Sure. The only thing I would say is that you want to become increasingly bearish as stocks look the best. And right now, if you look at a chart, they look pretty darned good.
KANGAS: All right. Great to see you again. Thanks for being with us.
DEPEW: Thank you, Paul.
KANGAS: My guest Kevin Depew of Minyanville.com.
