"Street Critique"-Kevin Depew, Managing Editor, Minyanville.com
Wednesday, May 23, 2007PAUL KANGAS: With the broad-based Standard & Poor's 500 now joining the Dow near record high levels, tonight's "street critique" guest is seeing a worrisome trend in one of its key indicators that he's watching. He's Kevin Depew, managing director of the financial education web site minyanville.com. Kevin, welcome back to NIGHTLY BUSINESS REPORT.
KEVIN DEPEW, MANAGING EDITOR, MINYANVILLE.COM: Thank you, Paul. Nice to be here.
KANGAS: I take it that you're feeling a bit contrary about stocks at these levels. Why is that? What are you seeing that others are most others aren't?
DEPEW: Maybe I'm not the only one. I noticed that this afternoon former Federal Reserve Chairman Alan Greenspan had some negative comments to make about Chinese stocks.
KANGAS: True.
DEPEW: What I'm seeing in the market is that there's an indicator called the Russell 2000 bullish percent index. That indicator just tracks the percent of stocks on the Russell 2000 that are on (INAUDIBLE) and were actually the lower level and negative on that indicator even as the Russell 2000 has made new highs lately and that's a worrisome trend. That's saying that fewer and fewer stocks are responsible for the index going down (ph).
KANGAS: And that's a very broad-based index, is it not?
DEPEW: Absolutely. On the other side of the coin, we are seeing positive movement in the S&P 500 indicator and for the NYSE so there's a large cap bias going on.
KANGAS: Are there any specific sectors you're avoiding and if so why?
DEPEW: Absolutely. I want to stay away from consumer discretionary. I think the consumer is running into some trouble as well health care. I think there are some political issues on the horizon that we need to be aware of and real estate investment trusts. I'm not concerned that the housing market is downtrend. Building stocks may have reached a low, but certainly real estate investment trusts have been supported pretty well over the past couple of months.
KANGAS: However, I understand that you do have a couple of picks on the long side for our viewers that you consider contrarian plays. What is your first pick?
DEPEW: The first one is Bank of America (BAC) and I know this is a large cap bank. It's the second largest in terms of assets. It's been an underperformer though in its peer group particularly against Citigroup and there are some positive technical patterns going on with Bank of America that I think makes it a buy.
KANGAS: Looks like it's building a nice base here just above 50. How about another?
DEPEW: Sure. The next one is - this is not a stock I would want to buy but it's one that I want to watch. Everybody needs a market tell and Beazer Homes (BZH) is an interesting stock because the company has been very aggressive about being very negative on the housing market saying that they're not seeing any signs of support, any signs of demand reentering. They're under investigation from the FBI for potential mortgage fraud. So there's not anything that can wrong with this stock has gone wrong again. I'm seeing positive technicals develop in this stock.
KANGAS: We have time for one final pick.
DEPEW: One final pick is going to be Wal-Mart (WMT). It's fashionable to hate Wal-Mart but I think this is an anti-consumer discretionary play. When the consumer starts taking heat, they go to Wal- Mart instead of Target, instead of some of the other retailers.
KANGAS: Do you personally own any of these issues, Kevin?
DEPEW: No, I do not.
KANGAS: OK, all right, well, I want to thank you for joining us and we'll see how your contrarian view works out. Thanks very much for being here. My guest Kevin Depew of minyanville.com.
