"Market Monitor"-Derwood Chase, CIO, Chase Investment Counsel
Friday, October 23, 2009PAUL KANGAS: My guest "Market Monitor" this week is Derwood Chase, the CEO and chief investment officer of Chase Investment Counsel and welcome back to NIGHTLY BUSINESS REPORT, Derwood.
DERWOOD CHASE, CHAIRMAN & CEO, CHASE INVESTMENT COUNSEL: Thanks very much, Paul.
KANGAS: When you were last with us in May, stocks had rallied sharply off their March lows and you were a reluctant bull, saying the move higher was likely short term in a long-term bear market. Have the continued gains since then changed your mind?
CHASE: Well the market rally, the cyclical bull market has developed very nicely. We still think that there's headwinds ahead, maybe next year or the year after.
KANGAS: But so far clear sailing for a while until then?
CHASE: We've gone far enough so that the market is a little bit, I think, over anticipating some of the earnings. So from here on out, it's going to be show me and if the companies do well to make further progress.
KANGAS: What is your view of the quality of third quarter earnings so far?
CHASE: Well, it's been interesting that many companies have increased their productivity, reduced their costs, so although revenues have been a little bit light in many cases, the earnings have come through very nicely. If they can maintain that efficient cost of productivity, they should be OK.
KANGAS: All right. Is the economy now getting strong enough to support boosting interest rates to stave off inflation pressures?
CHASE: I don't think so quite yet. And I don't think the Federal Reserve is going to think so either.
KANGAS: OK. In May you gave us three stock recommendations. Let's see how they've done since then. We see TJX Company (TJX), what a gain, almost 41 percent, great call. Do you still like it?
CHASE: Yes. We still hold that and would buy it if we didn't own it.
KANGAS: OK and Schlumburger (SLB) up 26 percent. They had earnings out today lower, stock dropped a bit but nevertheless the stock is way up from when you recommended it. Still with it?
CHASE: We took profits in most of our Schlumberger, but I think it's still a good hold. We still own it.
KANGAS: There was a third recommendation that you made, Newmont Mining (NEM), the big gold and it's actually down 4.5 percent and gold is through $1,000 an ounce. How do you explain that?
CHASE: Well, one of their mines was a little bit late on opening and another in Indonesia had a collapse. I think that was due to a hurricane or an earthquake, I don't remember which. So, but I think and ETF's have been more popular than gold mining shares in some cases, so a combination of factors.
KANGAS: OK. How about some new recommendations, Derwood?
CHASE: We think Google (GOOG) is currently attractive, even though it's done very well price wise. It's by far the leading search engine as virtually everybody knows. They had an excellent quarterly report just recently and it's still about 21 times estimated 2010 earnings and we feel that's a solid holding.
KANGAS: OK, number two recommendation?
CHASE: Visa (V). Every time you have a transaction on a credit card or a debit card or a Visa card, they make a tiny fee.
KANGAS: V is the symbol.
CHASE: I'm sorry, V, yes.
KANGAS: We just have a minute left Derwood. We'd like to get two more selections in if we could.
CHASE: OK. Walgreen's (WAG), the leading by sales drugstore chain. About 25 percent of their stores are within three years and so it's not mature, so they tend to get increasingly profitable as they are held longer. And finally -- that's WAG -- and finally AUY, Yamana Gold, mid- sized gold, but growing more rapidly than Barrick and Newmont. We think that's quite attractive among gold mines.
KANGAS: OK fair enough. Derwood, do you personally own any of these stocks mentioned or have other disclosure?
CHASE: I'm a large holder of both the Chase growth fund and the Chase madcap growth fund, so I own them indirectly one way or the other.
KANGAS: Very good. I want to thank you for sharing your insights with us once again.
CHASE: My pleasure.
KANGAS: My guest, Derwood Chase of Chase Investment Counsel.
