"Market Monitor"-Derwood Chase, President of Chase Investment Counsel
Friday, June 06, 2008PAUL KANGAS: My guest "Market Monitor" this week is Derwood Chase, president of Chase Investment Counsel based in Charlottesville, Virginia. Welcome back to NIGHTLY BUSINESS REPORT, Derwood. Good to see you.
DERWOOD CHASE, PRESIDENT, CHASE INVESTMENT COUNSEL: Glad to be back.
KANGAS: Today's news couldn't have been much worse for Wall Street, with the large jump in unemployment, surging oil prices, a weak dollar. Do you think that the steep sell off in stocks today pretty well discounted all these negatives or will the market go lower, a lot lower from here?
CHASE: It looks to us as though the January lows ought to hold. But that doesn't mean they won't be tested again, Paul. And it's hard to imagine that all the negatives have been fully discounted by the market, but so far it looks that way.
KANGAS: Now, on your last visit with us in August, you correctly predicted the housing slump still had a long way to go. How do you see it now?
CHASE: Well, I think it has a way to go in terms of the financial institutions and write offs, but we've made a lot of progress in terms of getting house prices back to affordable levels. When we spoke back in August, I think they were more than two standard deviations above the median income growth and now we're getting back to affordable levels. So the problem on that side ought to start correcting itself.
KANGAS: So you see a little light at the end of the tunnel there?
CHASE: Indeed.
KANGAS: OK. What are your thoughts on the outlook for oil? That has been the major news story all week, especially today.
CHASE: Well, for two years we've been in the Boone Pickens Matt Simmons camp of being very bullish on prices. I think it's mostly a supply- demand problem, although it gets exacerbated by some hedging and speculation from time to time, but we're still bullish on prices.
KANGAS: There was a prediction today, $150 a barrel oil. Do you think it is going there?
CHASE: Yes. It's just a question of how soon.
KANGAS: OK. Also last August you recommended four stocks. Let's see how they've done since then. We see EMC Corp (EMC) down 6.4 percent. Not a bad move considering what is going on these days. Hewlett-Packard (HPQ) is up 1 percent. Are you still with these?
CHASE: We've sold both of those. We took profits in EMC and after it was up a bit from our last meeting.
KANGAS: Yes, it was.
CHASE: And sold at about the price of Hewlett-Packard, where it was.
KANGAS: Let's see what your other recommendations did. The oil patch, National Oilwell (NOV) up almost 54 percent. That's a great winner. I congratulate you on that one. Are you still with it?
CHASE: We held it for quite a while after the last meeting, but we did switch it into some exploration companies.
KANGAS: OK and Schlumberger has had a decent rise too. Those two have done very well. Are you still with SLB?
CHASE: We switched it as well. We actually increased our energy emphasis but switched those stocks. We're combining quantitative and technical work and some of those stocks went up and then back down a bit and went out under our process.
KANGAS: Derwood, how about some new recommendations for our viewers? What's your first pick and the ticker symbol?
CHASE: Burlington Northern, BNI.
KANGAS: The big rail?
CHASE: Yeah, 50,000 miles of track, eight seaports that they service. And, you know, rail is becoming recognized for being much more efficient carrier as fuel prices go way up.
KANGAS: And we need that in a slowing economy, more efficiency, correct?
CHASE: Indeed.
KANGAS: Yeah. How about a second selection?
CHASE: Encana (ECA). They just recently announced they're going to split into two parts. We primarily bought Encana because after the split, it will be the second largest natural gas producer in North America. And they've got about 16 million acres to explore. So it has a huge position for further increasing.
KANGAS: OK, we only have less than a minute now, but how about a final pick. And I think it is going to be a familiar name, correct?
CHASE: Yeah. Wal-Mart (WMT), a good defensive growth stock. Recently, their same store sales have been up and the 24 percent that's international is growing much faster than domestic.
KANGAS: Understood. Do you own any of these issues we've talked about or have any other disclosure to make?
CHASE: I own all of them through Chase growth fund, which is diversified over 35, 40 stocks and a better way to invest unless you've got a big portfolio.
KANGAS: Understood, very interesting. Derwood, I want to thank you for being with us once again.
CHASE: My pleasure.
KANGAS: My guest, Derwood Chase, president and chief investment officer at Chase Investment Counsel.
