"Street Critique" -Kevin Depew, Executive Editor Minyanville.com
Wednesday, February 13, 2008PAUL KANGAS: Tonight's "Street Critique" guest says even with today's run-up in stocks, we're well into a bear market. He's Kevin Depew, executive editor of the financial education website minyanville.com. Kevin, welcome back to NIGHTLY BUSINESS REPORT.
KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: Thanks very much, Paul.
KANGAS: Well, it certainly didn't feel that bearish on Wall Street today! Tell me about what you're seeing that makes you a bear.
DEPEW: Well, you're right. We take a longer-term look and a longer- term approach. What we're seeing are the same things that we saw towards the end of 2007, a narrowing in participation in the market. If you look at the individual components of the S&P 500, Paul, there are only about 1/3 of those stocks outperforming the index year over year. And by definition, when you have fewer stocks outperforming the index, it's going to be tough to be an individual stock selector.
KANGAS: So the cause of it, you think, are still the credit problems which are far from over? Is that right?
DEPEW: Absolutely. This is going to be a 2009 problem to try to sort through. These problems are not -- in fact they're getting worse. We've seen even problems spreading to student loan and auction rate securities over the last couple of days.
KANGAS: Are there any specific stocks that you see doing well in this bearish environment?
DEPEW: Well, there are and there are always stocks to buy in a bear market. We're focused on consumer staples. First stock I like is Sara Lee (SLE).
KANGAS: OK, we have it up here on the screen. Closed at $13.60 today. That's about $5 below its 52-week high.
DEPEW: Right. I was on this company's conference call about a couple of weeks ago. And it's interesting, because they have the same problem all food service companies do, increasing grain prices, but they have pricing power. They raised prices last year. Consumers did not push back and they're going to raise prices again.
KANGAS: OK, that's SLE on the New York Exchange, correct?
DEPEW: Yes.
KANGAS: Let's have another choice.
DEPEW: Fortune Brands (FO). Another company I was on their call. Now, they have a large significant portion of their revenue comes from home products, a little bit over half. But their growth is in distilled spirits. And consumers, they're finding even in recessionary environments are not trading down. I guess in recession, liquor is the last to go.
KANGAS: FO is the trading symbol on the big board there. And how about a third choice? We have time for that.
DEPEW: The consumer staple spider ETF, XLP is the symbol. That contains 39 companies. It's in that sector that we like. If you go back and look at this quarterly, it's just now turning up in performance versus the S&P 500 and I think longer term, that this is a sector that is finally about to have its day again.
KANGAS: XLP also trading on the big board, I believe. You're really in a defensive portfolio there, are you not?
DEPEW: That's right. You have to have your guard up sometimes. Keep your hands up in a tough fight.
KANGAS: Kevin, do you own or have any other disclosures for the stocks you mentioned?
DEPEW: I do. I own all three of those, Paul.
KANGAS: That's a vote of confidence on your part, isn't it?
DEPEW: Put your money where your mouth is.
KANGAS: There you go. Thank you for being with us. We'll see you soon again.
DEPEW: My pleasure.
KANGAS: My guest, Kevin Depew, executive editor at minyanville.com.
