"Street Critique"-Paul Larson, Equities Strategist at Morningstar
Wednesday, January 21, 2009JEFF YASTINE: Tonight's "Street Critique" guest says there's an exceptionally large number of high quality stocks on sale. He's Paul Larson, equities strategist at Morningstar and editor of the "Morningstar Stock Investor" newsletter. Paul, welcome to NIGHTLY BUSINESS REPORT.
PAUL LARSON, EQUITIES STRATEGIST, MORNINGSTAR: Thanks for having me.
YASTINE: The first question here, what's your take on this current market environment?
LARSON: I think this market is exceptionally volatile. It's seeming like 2009 is looking a whole lot like 2008 was with very high volatility and a focus on the financial sector. When is this credit crisis going to end? Right now it's an open-ended question. We had a good day today, but I don't think we're out of the woods by any stretch of the imagination.
YASTINE: You haven't been a "Street Critique" guest before. Give us a sense of your market and investment philosophy.
LARSON: Well, my focus at Morningstar is on the high quality companies or as we call it here, the wide mode companies or as what other people might say the blue chips. The good thing about focusing on high equality companies is that these are companies that tend to have stronger balance sheets, very good competitive positioning and all else equal, these companies are going to be the survivors of a tough environment. And I think that focusing on the survivors is a very prudent thing to do, given how bad this recession is turning out to be.
YASTINE: You brought some suggestions along for us. The first one is Berkshire Hathaway (BRK.B), Warren Buffett's holding company and these are the class B shares.
LARSON: That's exactly right. We think that the class B shares are worth $4,800 apiece. And the stock is a little bit under $3,000 so you have a nice, potential return there and this is a company that is incredibly well positioned to take share as some of the weaker competitors fall by the wayside, companies like AIG and Ambac and Warren Buffett is still at the helm, still creating a copious amount for the company and it's sold off quite a bit and it's cheap today.
YASTINE: Paul, we have about 45 seconds left. Give us your second one, General Dynamics (GD)?
LARSON: Yes. This is a defense company. And as a defense company, it should be relatively insulated from the economic environment and it's also trading on the cheap. We think that there's a potential 50 percent upside from here today.
YASTINE: And then you have a health care stock as your final pick.
LARSON: That's exactly right, Novartis (NVS) and this is sort of like the Swiss J&J. They cover the waterfront regarding what sort of products they sell, everything from branded pharmaceuticals to generic pharma, to consumer products. And this is a stock that we think should be relatively safe. Health care is not really affected by the economic environment and this is a very high quality company that is trading at an inexpensive price.
YASTINE: Paul, any quick disclosures for us in the stocks you've talked about here.
LARSON: Absolutely. The cook is eating the cooking here. At Morningstar, I own all three of them, both in the model portfolio I run for Morningstar as well as personally. YASTINE: Paul, thank you for your time on our program. Our guest, Paul Larson, equity strategist at Morningstar.
