"Market Monitor"-Chris Orndorff, Head of Equity Strategy for Payden & Rygel
Friday, August 29, 2008PAUL KANGAS: My guest "Market Monitor" this week is Chris Orndorff, head of equity strategy for money management firm Payden & Rygel, based in Los Angeles. Welcome back to NIGHTLY BUSINESS REPORT Chris. Good to see you.
CHRIS ORNDORFF, HEAD OF EQUITY STRATEGY, PAYDEN & RYGEL: Thanks, Paul, great to see you.
KANGAS: It seems that the Wall Street analytical corps generally thinks we are in a bear market. How do you see it?
ORNDORFF: I would agree. I think it's a very difficult environment. I-- I think, however, you're likely to see bear market rallies, just like you did in 2001 and 2002 of 20 percent or more, probably last about two month or so, for those rallies. That's the time when you want it take your profits, reduce the portfolio beta (ph) and be a little more defensive.
KANGAS: You have to be pretty nimble for that though, don't you?
ORNDORFF: You do, but it is but it's good to take advantage of those low capital gains breaks while they exist.
KANGAS: How do you see the downside risk percent-wise in the market?
ORNDORFF: I think you can fall another 15 percent from these levels, I'm sorry to say. But I think that's the way it looks, in terms of earnings projections.
KANGAS: But play those rebound rallies on the way down, you say.
ORNDORFF: That's exactly right.
KANGAS: Now on your last visit with us in late January, you believed oil was going to drop to the mid-$50 per barrel range. You were a little off there. What are your thoughts on oil now?
ORNDORFF: I'm going to stay with the same theme, but I think $95 will be the new target price and thankfully I don't have to make a living predicting oil.
KANGAS: Fair enough. You did hit the interest rate outlook right on the head by predicting a Fed fund rate would fall to a flat 2 percent right where it is now. Where do you go from here?
ORNDORFF: I think it's going to be about the same. Mr. Bernanke is very concerned about inflation. That's going to remain one of the key concerns. The economy is very weak so there's not a whole lot he can do.
KANGAS: All right, now in January you gave our viewers four "buy" recommendations. Let's see how they've fared since then. Chattem Corp. (CHTT) up 7.6 percent, health products is their business, right?
ORNDORFF: That's exactly right. Still a great company, I'd hold it.
KANGAS: Hold it, but not buy new stock here?
ORNDORFF: I'd buy more too.
KANGAS: OK, Coca-Cola (KO) is down almost 11 percent since then, but it traded as high as $65 between January and now. You took some profits, did you?
ORNDORFF: Well, no. I would still hold on. I think this business will do very well in the slowing economy and we'd buy more.
KANGAS: OK, we have the third and fourth choices. You did very well on Potash (POT), that's a fertilizer company, up 31 percent nearly and it traded as high as $240. You must have taken some money off the table there.
ORNDORFF: Oh, sure.
KANGAS: OK. And then the big clinker, MGM Mirage (MGM), down 50 percent. What's going on there?
ORNDORFF: Well, we took a gamble on that one and Vegas traffic has really dried up. So that was a bad roll of the dice.
KANGAS: OK, fair enough on that. How about new recommendations, Chris?
ORNDORFF: Sure. In these three companies I'm going to talk about are similar to three of the ones from the last show. Again, this is not a market to really be a hero. It's a market to focus on companies with good fundamentals. The first one would be CR Bard, which is ticker symbol BCR. It's a disposable medical products company, 100 years old, a leader in vascular, urology and oncology procedures.
KANGAS: The stock has held up rather well this year through the ups and downs, hasn't it?
ORNDORFF: Yeah, it's a very stable, solid company.
KANGAS: OK, selection number two.
ORNDORFF: The next one is SPX Corp, the ticker SPW. This is really a leader in the global infrastructure space, not so much roads and bridges but really electrical infrastructure, water infrastructure and recycling infrastructure. And really a super company with a great management team.
KANGAS: OK, one more.
ORNDORFF: And then the third would be a company called Ansys, which is ticker ANSS. If you're an engineer or designer you know this company very well. They're one of the leading software providers for those industries and in electrical and aerospace, they really help businesses maintain and grow profit margins.
KANGAS: Interesting. Do you personally own any of the securities mentioned or have other disclosures to make?
ORNDORFF: We do. We own all these in our U.S. growth leaders fund as well as I own them personally.
KANGAS: OK, thanks for sharing your views with us once again. Good to see you.
ORNDORFF: Thanks, Paul, always a pleasure.
KANGAS: My guest, Chris Orndorff of Payden & Rygel.
