"Street Critique"-Patrick O'Hare, Editor in Chief of Briefing.com
Wednesday, December 19, 2007PAUL KANGAS: While the January effect looks at the tendency for small cap stocks to outperform large cap stocks in the early part of a new year, tonight's "Street Critique" guest says there's another January effect. He's Patrick O'Hare, editor in chief of the investor education website briefing.com. Pat, welcome back to NBR.
PATRICK O'HARE, EDITOR-IN-CHIEF, BRIEFING.COM: Hi, Paul, thank you, good to be back with you.
KANGAS: With the markets as volatile as they've been, do you think we will see the traditional short-term boost in small cap stocks in the coming weeks?
O'HARE: Well, we have seen the Russell 2000 under perform this year which would suggest there is some ample opportunity there for that trade to take effect. And I would note that we've seen some vestiges of it this week as the Russell 2000 since Monday's close is up about 2 percent versus a half percent gain for the Russell 1000.
KANGAS: OK, now tell me about this other January effect that you are anticipating.
O'HARE: Sure. Well, the market has a tendency really to not just look at small cap issues in the early part of the year, but to look at beaten down names from the prior year. And that extends to market caps of all sizes. And we think that there are several large cap opportunities there that I would like to brick to the attention of your viewers.
KANGAS: And in recent years the January effect has actually begun in December, has it not?
O'HARE: It has. "Stock Traders Almanac" has noted it really has its roots about mid-December. Of course the more popular this trading phenomenon becomes, arguably it becomes less effective so it is something that your viewers should keep in mind.
KANGAS: Understood. How about giving our viewers some of the beaten down names you think could show some up side in the near term.
O'HARE: Well, one is Starbucks. The stock symbol is SBUX and while plenty of consumers are hooked on its coffee, the market clearly has not been hooked on this stock. It is down about 40 percent year-to-date and off about 50 percent from its all-time high amid concerns about a slowing growth rate. But we do think that it's -- because of that haircut, it's going to start hitting the radar screen for fund managers who have an approach to buy growth at a reasonable price, not necessarily growth versus at any price.
KANGAS: OK. Now your second pick is an ETF exchange traded fund. And it is certainly been beaten down as we look at this chart. We can bring that chart up.
O'HARE: There it, the financial select spider fund.
O'HARE: That's right it is a mouthful. The symbol is XLF. And the thing with this idea is that it offers a more conservative way to play this rebound trade. We're still concerned that there are some write-down skeletons in the closets that could still emerge to sink any number of stocks at any given point but it's well diversified here and we think it mitigates some of that risk.
KANGAS: We just have about 40 seconds for a final choice, if you would.
O'HARE: Motorola, symbol is MOT. The stock's down about 20 percent year-to-date. The market became disenchanted with the company as the consumer interest in the popular Razr phone waned and the company lacked any new products to really offset that decline. And I would note that Carl Icahn has been very vocal of late in terms of talking about working toward ways to help this company bolster shareholder value through share buyback or possibly breaking up the company.
KANGAS: Interesting selection Pat. Incidentally, Do you own any of the issues you mentioned or have any other disclosure to make?
O'HARE: No, I do not, Paul.
KANGAS: All right, want to thank you for joining us again. We'll look forward to seeing you in the New Year.
O'HARE: Great, thank you.
KANGAS: My guest, Patrick O'Hare of briefing.com.
