Sam Stovall of Standard & Poor's Equity Research Analyzes 2007's Market Movements
Tuesday, January 01, 2008JEFF YASTINE: And to fill us in on the details of the past year's market action joining us is Sam Stovall, Chief Investment Strategist for Standard & Poor's Equity Research. Sam, Happy New Year, welcome back to NBR.
SAM STOVALL, CHIEF INVESTMENT STRATEGIST FOR STANDARD & POOR'S EQUITY RESEARCH: Thanks Jeff, happy to be here.
YASTINE: Let's begin by taking a look at the relative performances of the major averages and we have the NASDAQ 100 which did so much better than the Dow and the S&P. What was behind that move?
STOVALL: Certainly I believe it was the increase in earnings optimism not only for 2007 but also going into 2008.
YASTINE: Let's take a look at some of the individual winners and losers last year. We'll start with some of the big gainers for the Dow. Topping that list we had Honeywell, which is one of the original computer and technology makers.
STOVALL: Well Honeywell benefitted from international demand in its automation and control systems as well as its aerospace segments.
YASTINE: And then we have Merck, drug maker.
STOVALL: Recently it reaffirmed its double digit earnings growth prospects through 2010 and outlined a 49 project pipeline.
YASTINE: And this next one, no surprise to most people. Citicorp leaning to the downside with the sub-prime lending, sub-prime housing mess.
STOVALL: Well on top of that, we now have speculation by firms that Citigroup could be cutting its dividend.
YASTINE: We also had another casualty of the weak housing market which was Home Depot shares again on this list for the second year in a row.
STOVALL: Down 36% over the last couple of years. It actually reached close to $40 per share back in late 2005.
YASTINE: Let's look at the S&P 500. We had National Varco or actually National Oilwell Varco, which led the gainers there.
STOVALL: The company had a positive article in Barron's which stated it has profited from a dominant position providing equipment to oil and gas drillers.
YASTINE: And then we see Jacobs International. What do they do?
STOVALL: Well they're an engineering firm, and they've benefitted from robust revenue growth and new bookings for energy and infrastructure projects. As well as being added to the S&P 500.
YASTINE: On the downside on the S&P 500, we had E*Trade Financial again another financial name here.
STOVALL: That's right. Right down to its $12M home equity portfolio as well as loss of customer assets have been a major drag on the shares.
YASTINE: Countrywide Financial again another financial, number two on that list.
STOVALL: That's right. If you can believe it, the shares traded close to $44 back on February 2.
YASTINE: All right, let's take a look at the NASDAQ 100. The top winner there, Baidu.com. Some people call it the Chinese Google.
STOVALL: Well it certainly benefitted from the two most exciting themes of 2007 that being internet search and China.
YASTINE: And Intuitive Surgical, another triple digit winner, selling up -- if I may -- another 2007 a good 2007.
STOVALL: The shares have risen on strong placements and higher selling prices for its DaVinci surgical systems.
YASTINE: And on the NASDAQ 100 on the downside we have Level 3 Communications.
STOVALL: Basically, it was a failure to integrate acquisitions that therefore led to slower revenue growth.
YASTINE: And the stock of the coffeehouse giant Starbucks again also on the downside.
STOVALL: Also on the downside mainly because of increased competition from the likes of McDonald's and Dunkin' Donuts.
YASTINE: All right Sam, thanks for coming on the show. Thanks for your analysis.
STOVALL: You're welcome.
YASTINE: Our guest, Sam Stovall, Chief Investment Strategist for Standard & Poor's.
