Street Critique with Michael Farr of Farr, Miller, and Washington
Wednesday, January 07, 2009PAUL KANGAS: Tonight's "Street Critique" guest has brought us his shopping list for 2009. He's Michael Farr, president of the money management firm Farr, Miller and Washington and author of "A Million Is Not Enough." Michael, welcome back to NIGHTLY BUSINESS REPORT.
MICHAEL FARR, PRESIDENT, FARR, MILLER & WASHINGTON: Thanks, Paul, great to be with you.
KANGAS: The last time you were with us in early December, you were telling our viewers to be patient with this market because there was little else you could do, too late to panic. What's your view of the market now?
FARR: Be patient. Little else you can do, too late to panic. But valuations are still reasonable. And as you think about investing over the next four or five years, I think valuations are good. Remember that everything kind of old is new again. You can start nodding along with me. Remember that balance sheets matter. Earnings matter. Strong management matters. If it seems too good to be true, it probably is. Play it down the middle.
KANGAS: All right. Now you were also crafting a shopping list the last time you spoke to us. I understand you brought your top 10 picks for 2009 for our viewers. Let's get started. What's your first pick and why.
FARR: Here we go. Stryker (SYK). I told you last time I really liked health care. Stryker makes replacement hips and knees, joints, that sort of thing in the medical area, 12 times earnings with double digit earnings growth, 1 percent dividend. I think it's a good, solid place to be.
KANGAS: OK, SYK is the symbol on the big board. Number one, number two.
FARR: Number two and not necessarily in the order of preference. CVS (CVS), the drugstore chain, very well managed, doing very well. Ten times earnings. I think that's pretty cheap, double digit earnings growth over the next five years, 1 percent dividend. Though as people get older, they go through the drugstore to get their prescriptions and they buy the chips and the bubble gum in front and it's good for CVS.
KANGAS: OK, symbol CVS on the big board. Next one.
FARR: Colgate Palmolive (CL), again a consumer staple was one of the other areas I recommended when I was on last time, 16 times earnings, strong earnings growth, solid balance sheet, 2.3 percent dividend.
KANGAS: OK. CL, Charlie Lima as we say in the phonetic alphabet. Go ahead, next one.
FARR: Mr. Softy, Microsoft (MSFT), $19 a share it closed today. I think the stock is still cheap relatively, 10 times earnings. I think those earnings will grow in the next five years probably 10 percent a year, 2.5 percent dividend. And look, we've done a medical stock. We've done a retailer. We're getting into different industries all the way through. Consumer staples, technology. We're going to do another medical.
KANGAS: OK, another one, we have less than a minute.
FARR: Johnson & Johnson (JNJ) I think is a terrific company, 13 times earnings growing those earnings around 10 percent. Again next five years I don't know about the next six months, 3.1 percent dividend. Another tech name, Cisco (CSCO), 12.9 times earnings, 15 percent earnings growth, don't have a dividend there. I like Medtronic (MDT) again in health care, Medtronic 10 times earnings, 13 percent earnings growth, 2.3 percent dividend. Going to diversify back to the retailers. Staples (SPLS) really best in class, strong management. I like it 13 times earnings. I think again double digit earnings growth over the five years. Tough this year. Danaher (DHR) at 15 times with again double digits earnings growth, no dividend. Here's my one, JPMorgan (JPM) in the financial space. Cross your fingers. I think it's best of breed, 12 times with a 5.2 percent dividend.
KANGAS: We've run out of time but our viewers can find the rest of your top 10 picks on our web site. And before we go, Michael, do you own any of the stocks we've talked about or have other disclosures to make?
FARR: I do, Paul. I own all of them. My family owns them and we own them in firm accounts. I have skin in this game.
KANGAS: All right, good, Michael, thanks for joining us again.
FARR: Thank you, Paul, very much.
KANGAS: My guest, Michael Farr of Farr, Miller and Washington and author of "A Million Is Not Enough."
*For more info about Michael's picks, check out the Learn More section of our website.
