"Street Critique" -Patrick O'Hare, Chief Market Analyst at briefing.com
Wednesday, February 27, 2008PAUL KANGAS: Tonight's "Street Critique" guest says the stock market is at a crossroads of sorts. He's Patrick O'Hare, chief market analyst at briefing.com and author of briefing's bargain hunting column. Pat, welcome back to NIGHTLY BUSINESS REPORT. PATRICK O'HARE, CHIEF MARKET ANALYST, BRIEFING.COM: Thank you, Paul.
KANGAS: Explain what you mean by the market being at a crossroads at this point.
O'HARE: Sure. We're in a little bit of a range-bound trade now. If you look within the market itself at the economic sectors, you see some divergence of opinion there. You have defense pouring into areas like consumer staples and health care outperforming the market but at the same time, you have areas like financial consumer discretionary and the transports which tend to do better in most growth-oriented environments outperforming the market. So it does suggest that we're at a bit of a crossroads here in the market trying to see which way things are going to break. We think they're going to break ultimately to the up side.
KANGAS: You're taking the bullish road.
O'HARE: We are on account of the Fed's efforts as well as the impending arrival of the fiscal stimulus.
KANGAS: So you made positive of Chairman Bernanke's testimony in Congress today?
O'HARE: Well, he pretty much stuck to the Fed script. He didn't say anything entirely new. He did acknowledge some inflation pressures but at the same time, he provided the market a pretty clear understanding that the Fed stays ready to cut interest rates yet again at the March 18 FOMC meeting.
KANGAS: You've brought our viewers a couple of stock selections. The first one you think is currently undervalued. What is that stock?
O'HARE: Right, General Electric. Stock symbol is GE. And while it's the bluest of the blue chips, we think it has a growth story that has gone under appreciated market. CEO Jeff Immelt has done a commendable job of reshaping the company so that it's positioned in higher growth areas within the infrastructure and financial and environmental technology areas as well as health care. Stock trades with the market multiple. The company has a triple-A credit rating, pays a very nice and secure dividend and we think it really is just undervalued here for the investment-minded individual.
KANGAS: And the chart that we had up on display there indicated maybe a bottom has been forming in this stock. Do you agree with that?
O'HARE: Well, we certainly hope so. But you can't time those things. We just think that it does offer some nice value here.
KANGAS: OK. How about another stock? I understand you feel this one is in recovery mode.
O'HARE: Right. It's retailer Kohl's. The stock symbol is KSS. The stock just got clobbered last year as the market was pricing in all the recession worries. It went from about $80 to just under $40 per share. It's had a nice recovery off that bottom here, but even at its current level, it trade at a price that you saw maybe at the end of around 2003, yet earnings per share are up about 80 percent over that period of time. Operating margins have expanded nicely. We do think that it offers some growth here at a reasonable price for the long-term investor. The caveat there, the company reports earnings after the close on Thursday. Because of that nice run (INAUDIBLE), we probably would wait to initiative a position until after that report.
KANGAS: OK. Pat, do you own either of those two stocks or have any other disclosure to make?
O'HARE: No, I do not, Paul.
KANGAS: OK. I want to thank you for being with us once again.
O'HARE: Thank you.
KANGAS: My guest, Patrick O'Hare, chief market analyst at briefing.com.
