"Street Critique"-Patrick O'Hare, Chief Market Analyst, Briefing.com
Wednesday, September 10, 2008PAUL KANGAS: Tonight's "Street Critique" guest looks at the markets from a contrarian's point of view. He's Patrick O'Hare, chief market analyst at the financial information Web site briefing.com, and he's the author of the site's "Bargain Hunting" column. Patrick, welcome back to NBR.
PATRICK O'HARE, CHIEF MARKET ANALYST, BRIEFING.COM: Hi, Paul. Nice to be back with you.
KANGAS: Well, it has been a very scary time for investors. What is your current take on this market now?
O'HARE: Well, it has been really more of the same, which is to say, it has been very volatile given the prevailing sense of uncertainly on a number of fronts. It seems likely to remain the case certainly leading up to the election. But ultimately we continue to believe the market is in store for better performance overall over the course of the next year and think investors should stick with the dollar cost averaging approach.
KANGAS: Very good. Now before we get to your latest stock selection, let's take a moment to review some of your previous picks. When you were with us in late April, you liked Sysco (SYY), that's with an S, the food distributor. And it's up over 19 percent. That's a great call. Do you still like it here?
O'HARE: We do still like it. It's probably overdone a little bit on a short-term basis, but this is a very well-managed company. And despite that recent run, the stock still trades at a significant discount to the 10-year historical P/E average. So investors should maintain a position of some sort, even if they decide to take some money off the table here.
KANGAS: All right. Now in mid-June, you liked Target (TGT) stock, the big retailer. And it's up almost 12 percent. Another great call. And in a market like this, those are great picks. Are you still holding this one or taking some profit?
O'HARE: Well, first of all, thank you. And secondly, we do still like this name. It is probably, like Sysco, overdone on a short-term basis. It's up about 35 percent off the July low. But this is a very well-managed retailer and the stock also still trades at a significant discount to its historical P/E average. So we continue to hold it.
KANGAS: All right. Fair enough. Now how about a new selection?
O'HARE: Sure. Monster Worldwide (MNST). The symbol is M-N-S-T. This is a multinational company whose fortunes are tied to online job recruitment and advertising. Now that's not a great mix when you take into account that international growth is slowing, the U.S. labor market is deteriorating and advertisers have been more discreet with their spending. But if you look at the stock chart, it's evident that the market is very aware of that troublesome situation.
KANGAS: It has had a "monster" decline, hasn't it? Indeed. (LAUGHTER)
O'HARE: That it has, from its 2006 high, it's down about 70 percent. And frankly, with macro conditions being what they are, it seems probable that you're likely to see further downside here. Yet this stock draws some attention to us as a contrarian play because we think its long-term return prospects outweigh that near-term downside risk.
KANGAS: What kind of upside potential.
O'HARE: The stock -- company's. KANGAS: . do you see here price-wise? O'HARE: Well, if you take the 2009 earnings estimate of $1.49 and you apply a 20 multiple to that, which is roughly in-line with the projected long-term earnings growth rate, that produces a price of just under $30 per share, which suggests you get about 50 percent upside potential possibly from current levels.
KANGAS: That's very nice indeed. Pat, do you own Monster shares or any of the other stocks we've talked about tonight?
O'HARE: No, I do not.
KANGAS: OK. I want to thank you for being with us once again.
O'HARE: Great, thank you, Paul.
KANGAS: My guest, Patrick O'Hare of briefing.com.
