"Market Monitor"- John Dorfman, Chairman of Thunderstorm Capital
Thursday, March 20, 2008PAUL KANGAS: My guest "Market Monitor" this week is John Dorfman, manager of the Dorfman Value Fund and chairman of Thunderstorm Capital, an investment advisory firm based in Boston, Massachusetts. Welcome back to NIGHTLY BUSINESS REPORT John.
JOHN DORFMAN, CHAIRMAN, THUNDERSTORM CAPITAL: Thank you so much for having me Paul.
KANGAS: On your last visit with us this past October, you said stock market volatility will continue to pick up, but investors will just have to learn to live with it. So the Dow vaulted 420 points on Tuesday, tumbled nearly 300 yesterday and then jumped 261 today. Don't you think this is getting a little ridiculous?
DORFMAN: Last time I was on I said if you can't stand the heat, get out of the kitchen and we had just returned to normal volatility. So now the kitchen's getting pretty hot. I think some of us would wish to move to the dining room already.
KANGAS: Isn't there something that can done to curb these wild swings?
DORFMAN: No there's not much that can be done, but one of the great things about the stock market is that it does correct itself fairly rapidly, unlike the housing market, where houses will sit on the market for many months before the price is adjusted.
KANGAS: Is the bull market still alive in your opinion?
DORFMAN: I think that we clearly have at least a severe correct and that a was broken. You had asked me when I was on six months ago if it was over and I thought it had a little longer to run, but it actually ended three days before that. So we're in a severe correction or a bear market. But all bear markets pass, so (INAUDIBLE) get back to another bull.
KANGAS: Is all this market turmoil an indication that the economy is in a recession?
DORFMAN: I believe we are in one. I believe it started at the beginning of the year and I think it will be longer than normal, which means I think it will run all year and probably be over toward the end of 2008.
KANGAS: OK. Back in October --
DORFMAN: (INAUDIBLE) or sooner.
KANGAS: I understand. Back in October, you gave our viewers five recommendations. Let's see how they have done since then. And at the top of the board was Bear Stearns (BSC). Oh, boy. You're a veteran of Wall Street. I am sure you protected yourself with stop loss orders.
DORFMAN: Not in every account. We have some accounts where we took the full brunt of the Bear Stearns decline. All I can say is like Lloyd Bentsen said years ago in the vice presidential debate, I don't make too many mistakes, but when I make one, it is a beaut.
KANGAS: What do you think the outcome of this Bear Stearns takeover by JPMorgan will be?
DORFMAN: I hope the outcome will be a higher bid from another party that sees value in the prime brokerage operation there. I would like to see a bidding war.
KANGAS: All right. Let's have a look at some of those others that you mentioned. Commercial Metals (CMC) down almost 15 percent. Are you still with it?
DORFMAN: Yes, I am.
KANGAS: OK and then we had three other recommendations. Devon Energy (DVN) has been a real winner for you, up another 9.3 percent since October. Do you still like it?
DORFMAN: Yes. I still like it very much.
KANGAS: OK. How about Overseas Shipholding Group (OSG) down 4 1/2 percent?
DORFMAN: We still own Overseas Shipholding Group as well.
KANGAS: OK and there was one another that you went short on a short sell, Shuffle Master (SHFL) at 15, a very profitable all the way down to $5.38 today. Are you out of the short position or still in it?
DORFMAN: We have not covered it, but I have a new short recommendation for you today.
KANGAS: OK. Let's have a few of these new recommendations, first on the list, what is it?
DORFMAN: Let's start with Astrazeneca (AZN). It's a big British drug company. Everyone is concerned about the drug company pipelines, but this company has 10 drugs in phase three trials.
KANGAS: OK.
DORFMAN: And 12 drugs that sell more than $1 billion a year.
KANGAS: All right. Let's move along. We only have about a minute left, John. I see Columbia Sportswear (COLM) up there.
DORFMAN: Yes. I really like the management. They don't sugarcoat bad news. The next year should be tough with the recession but this is a debt free company and a good long-term recommendation.
KANGAS: OK, number three?
DORFMAN: Then I would reiterate Devon Energy (DVN). I think the U.S. has a secular (ph) shortage of natural gas. KANGAS: Stay with the winner. Go ahead.
DORFMAN: And then I will climb out on a limb. I don't think the whole brokerage industry is endangered, so in spite of my experience with Bear Stearns, I recommend Goldman Sachs (GS).
KANGAS: Very good, GS on the big board and then one final one, we just have 30 seconds left.
DORFMAN: OK. My new short sale is Vail Resorts (MTN), which runs a ski resort in Vail Colorado and I am shorting it partly because some of their revenue has come from land sales and I think it's going to be difficult for them to continue that at the same pace.
KANGAS: Trading symbol MTN.
DORFMAN: Correct.
KANGAS: OK, John, do you own any of the securities mentioned or have other disclosures to make about them?
DORFMAN: We are long all of the longs I mentioned, and we are short Vail.
KANGAS: All right. I want to thank you for sharing your views with us once again.
DORFMAN: My pleasure Paul.
KANGAS: My guest John Dorfman, manager of the Dorfman Value Fund and chairman of Thunderstorm Capital.
