"Market Monitor"-Eugene Peroni of Advisors Asset Management
Friday, January 30, 2009PAUL KANGAS: My guest "Market Monitor" this week is Eugene Peroni, senior vice president of equity research for based in Philadelphia. Welcome back to NIGHTLY BUSINESS REPORT Gene.
EUGENE PERONI, JR., SR. VP, EQUITY ANALYSIS, ADVISORS ASSET MGMT.: Nice to be here, Paul, thank you.
KANGAS: As a stock market strategist who specializes in technical analysis, give us your opinion of the market's current condition. Today it looked like it was intensive care.
PERONI: Well, certainly when we saw the raw numbers, January certainly being the worst month that we have seen -- worst January, that is in 30 years-- on the outside it looks like it would be negative, but the internals are starting to improve and I would argue they began to improve last October.
KANGAS: Yeah, but how about January as a bellwether month for the rest of the year. Does that carry any weight with you?
PERONI: Well, some but I think given the circumstances and the unprecedented action we've seen in the market, I wouldn't give that a lot of weight at this point.
KANGAS: OK. Now, on your last visit with us in mid-June with the Dow at the 12,000 level, you said you saw no technical signs of a major sell- off. We certainly got one, all the way down to 7400 in the Dow. How come your technical indicators didn't flash a warning?
PERONI: Well, things unfolded very rapidly, Paul. In fact, it's very interesting because as much as we've gone through a bear market, when we observe the best-performing stocks off the bottom from last year, October- November, many of those stocks and the groups they represent are the leadership that was in place before the downturn. So in some ways, the market has not had a basic change in leadership. I find that encouraging. That might have been one of the things that might have tripped us, that the leadership is still intact here.
KANGAS: Has the market finally put in a major bottom, and if so at what level on the Dow?
PERONI: Well, certainly it's too early to say a major bottom. But I think that we are establishing at least a trading bottom that could prove to be a major bottom. The lows that we saw last October and November were accompanied by very heavy selling. And I think that's the worst momentum we're going to see for some time. So since that point, we have been in a good recovery in terms of certain stocks and groups. So, yes, I do think that we have probably more upside than downside here over the next 12-18 months.
KANGAS: Well, what stock groups look good and which would you avoid at this level?
PERONI: Well, mostly we're looking at groups that we would buy at this stage. With a lot of speculation -- and I would argue a lot of risk out of the market at this stage -- we would be a little bit more on the aggressive side. So we would not really look so much at defensive growth stocks. We'd look instead at companies that have good earnings growth prospects going forward.
KANGAS: Last June, you gave our viewers four stocks that you would recommend buying. Let's see how they did since then. The first one was Core Labs (CLB). It's down 52 percent. But that's nothing unusual, just about everything is down. Itron (ITRI) down 32.2 percent. Are you still with those two and if so, would you buy more here?
PERONI: I like the technicals on both of those at this stage. I think that they will participate in a recovery.
KANGAS: And the other two that you recommended, Monsanto (MON) as blue chip as you could buy, down 45 3/4 percent. Still with it?
PERONI: Yes.
KANGAS: And Steel Dynamics (STLD), same story. That one is down almost 73 percent.
PERONI: Yes the materials and the steel stocks got very hard hit here but they are also showing signs of recovering.
KANGAS: Do you have any new recommendations, Gene?
PERONI: Yes, we have several. CR Bard (BCR), in the surgical supply area I believe looks --
KANGAS: We have a chart up and the symbol is BCR for trade trading on the big aboard, right?
PERONI: That's correct.
KANGAS: OK. Number two.
PERONI: Flowserve (FLS). This is a stock recommend a couple of appearances back -
KANGAS: And you did well.
PERONI: Yes, and I think that at these levels, it looks very attractive for the long term. They make pumps and valves for the petroleum industry, for the water infrastructure area as well. The symbol there is FLS.
KANGAS: FLS, very good, how about number three?
PERONI: It's a defense contractor, Lockheed-Martin (LMT). This is a blue chip that we think is going to do very well going forward. I think it's very well positioned based on the stimulus package and certainly the ongoing military conflicts.
KANGAS: OK, LMT on the big aboard, and we have time for one more, Gene.
PERONI: That would be SPX Corp (SPW). This company is the world's largest manufacturer of cooling towers. But they're very diversified. They make everything from tools to broadcasting equipment.
KANGAS: It's SPX, but the trading symbol is SPW. That's a little confusing, isn't it?
PERONI: It is, SPW is the symbol.
KANGAS: Do you personally own any of the stocks mentioned or have any other disclosures to make?
PERONI: I own a trust that do hold these companies.
KANGAS: So in essence you own them indirectly, all of them.
PERONI: Correct.
KANGAS: I want to thank you for being with us once again, Gene.
PERONI: My pleasure, thank you, Paul.
KANGAS: My guest Eugene Peroni of Advisers Asset Management.
