"Market Monitor"-John Dorfman, Dorfman Value Fund Manager and Chairman of Thunderstorm Capital
Friday, March 20, 2009PAUL KANGAS: This week my guest "Market Monitor" is John Dorfman, manager of the Dorfman Value Fund and chairman of Thunderstorm Capital, an investment advisory firm based in Boston, Massachusetts. Welcome back to NBR John. Good to see you.
JOHN DORFMAN, CHAIRMAN, THUNDERSTORM CAPITAL: Thank you, so good to see you again.
KANGAS: I'd like to get your opinion as to how the market and Wall Street in general is responding to the massive capital infusion the government is giving the economy.
DORFMAN: I think people were a little shaken and taken aback that the rescue plan seemed a bit hastily cobbled together, but when you stop to think about it, it's natural because we had a financial crisis right at the time of the change of administration. I think things will get a bit more organized as we move forward and I think Wall Street will take some heart from that.
KANGAS: Are you optimistic on the stimulus. Will it work?
DORFMAN: I think it will work over the long term. I don't think government alone can ever save the economy. Business has to come out of the recession itself, but I think the government aid on balance will help.
KANGAS: Wall Street's bulls are coming out of hiding in the last few weeks, showing a little life. Do you think the resent upturn is a bull trap or an uptrend that will last for a while?
DORFMAN: I think things will be scary and choppy but my guess is that you'll see some further improvement over the next nine months and that we'll end the year higher than we are now.
KANGAS: Your brief thoughts toward oil prices. Are they down for a while or are they going to move back up?
DORFMAN: They may be down I think for another three, four or five months but I think the next three to five year trend is likely to be up. I think over the next five years the price will usually finds itself between $70 and $100. We need oil in this country. We're not ready with nuclear. We're not ready with solar. There are problems with natural gas. So I think oil perhaps with have an upward trend.
KANGAS: On your last visit with us September 19th, you had five recommendations. They're all down dramatically. Let's have a look at them. It's been a rough market and Oshkosh (OSK.N) way down, Apache (APA) the same story. Are you still with them or would you buy them more here?
DORFMAN: I'm still with Apache and Oshkosh. I think it's a good company. I'm being very strict about debt right now and it has more debt than I feel comfortable with.
KANGAS: OK, let's have the other picks. AstraZeneca (AZN) down 27 percent and Gannett (GCI) -- newspapers are in major straits, down 88 percent. Still with those?
DORFMAN: I sold my Gannett. There is a lot more to it than newspapers, which people don't realize. However again, the balance sheet deteriorated to the point where I cut it off (INAUDIBLE) AstraZeneca.
KANGAS: OK. There was one last one, Illumina (ILMN) which you said short that stock. It had a two for one split since then but, based on that it was $42. It's down to $35 and it's been as low as $18 which gave you a big profit. How about now?
DORFMAN: I remain short Illumina. They are a supplier to the biotech industry and I think the biotech industry may be in for some tougher times over the next few months.
KANGAS: We have one minute for any new picks. Let's have a list of them if you do.
DORFMAN: Well, I'll start with Berkshire Hathaway (BRK.B), the redoubtable Warren Buffett and I like Merck (MRK). I think its pipeline (INAUDIBLE).
KANGAS: Let's get the Merck chart up there. There it is, Merck, OK, it's down. All right, number three?
DORFMAN: Number three I would recommend General Dynamics (GD). I think that while Democrats talk dovish and Republicans talk hawkish, there's not that much difference in what they actually do. I think defense stocks will do well. And my fourth long recommendation would be Overseas Shipholding Group (OSG) which is an oil tanker company. This is trading for less than two times earnings; it's very cheap.
KANGAS: It is really down. And the last one?
DORFMAN: Last I'll give you another short-sale recommendation, Star Scientific (STSI). They have a lozenge that they think will be a substitute for tobacco and I'm a little dubious whether it will be proved and if so, gain acceptance.
KANGAS: STSI on the NASDAQ right and you say short the stock, short it.
DORFMAN: That is my view.
KANGAS: OK John, do you own any of these stocks personally we mentioned?
DORFMAN: Yes, I own all of the stocks that we mentioned long and I own them for clients as well and for some clients and myself I'm short Star Scientific.
KANGAS: John, thanks again for sharing your insights with us.
DORFMAN: A pleasure
KANGAS: My guest, John Dorfman, president of Thunderstorm Capital.
