"Market Monitor"-Derwood Chase, President of Chase Investment Counsel
Friday, December 05, 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. DERWOOD CHASE, PRESIDENT, CHASE INVESTMENT COUNSEL: Glad to be here.
KANGAS: As a very conservative money manager, how you have fared in this grisly bear market?
CHASE: Well, Paul, you know, everybody is hurting. Our funds are down six or seven percentage points less than the relevant indexes, both our large cap and our mid-cap growth funds. So relatively, we've done well.
KANGAS: That's nothing to be ashamed of, if you better the popular averages. What strategies have you been using through all this volatility?
CHASE: Those are equity funds, so we have to stay fully invested. But we've been trying to stay with the high-quality, relatively stable companies and that's put us in good stead. We had to make a number of changes in order to do that because there hasn't been any consistent leadership.
KANGAS: As you know, we saw a very, very impressive upside reversal today from a 250 point Dow loss to over 250-point closing gain? Do you think that that marks the bottom of the market?
CHASE: This kind of a volatile market, I don't think it means too much. Naturally, we're glad to see an up day, but we haven't seen the characteristics of supply exhaustion on the selling side to target a bottom yet.
KANGAS: How about the outlook for oil? Crude closed today in New York at $40.81 a barrel. It's down about $100 from its high. What do you think?
CHASE: That's going to be favorable for consumers but it's tough on the energy companies. Some of the more marginal wells are going to have to be shut in. Most of the estimates we are seeing look for an average this coming year of $50 to $60 a barrel.
KANGAS: In your last visit with us, you had three recommendations for our viewers. Let's see how they've done since then. Burlington Northern (BNI), the big rail down 32 percent and EnCana (ECA), which is an energy- related issue down 57 percent. Are you still with those two or did you get stocked out? I know you used stop losses.
CHASE: We did sell part of the Burlington. We eliminated EnCana in August and July at 69.4 on average.
KANGAS: You had one other recommendation back on that last visit and that was Wal-Mart stores (WMT), which has held up beautifully. It's down less than a half percent and I think you probably still like that, do you?
CHASE: Yes, that's still our second-largest holding.
KANGAS: OK, very good. How about some new recommendations?
CHASE: Currently, we're continuing to stick with the high-quality, broadly diversified companies that don't require a lot of borrowing, Abbott Laboratories (ABT) is a well-balanced diversified--.
KANGAS: It's had a bumpy ride, according to the chart we have up there.
CHASE: Well, that's true, but it's a company that's able to increase their sales and earnings as they've been doing this year quite satisfactorily and their newest drug and their stent are both doing very well.
KANGAS: OK. How about a second choice?
CHASE: Procter & Gamble (PG). As you know, they've got several billion-dollar brands and great diversification.
KANGAS: PG on the big board, that's the symbol.
CHASE: PG, right.
KANGAS: OK. Go ahead. You had some more to say about it.
CHASE: I was just going to add that we think all three of our recommendations today, even in a really tough economy ought to be able to do double-digit earnings gains.
KANGAS: OK, what is your third choice?
CHASE: Wal-Mart, which is--.
KANGAS: You're staying with it.
CHASE: Yeah.
KANGAS: You would purchase more at this level? It hasn't fared badly at all, despite the grisliness of the bear market.
CHASE: Really, stocks in our view are at best holds. But if you're quite underinvested, I think as I mentioned last time, cash equivalent reserves are very important to cushion your portfolios. But if you are under invested, certainly Wal-Mart would be a candidate.
KANGAS: Derwood, do you personally own these securities you've mentioned or have other disclosures to make about them?
CHASE: I'm a large investor in our mutual funds, so I own them indirectly.
KANGAS: OK, very good. It's always a pleasure to see you Derwood, and I want to thank you for being with us once again.
CHASE: Thank you.
KANGAS: My guest, Derwood Chase of Chase Investment Counsel.
