"Market Monitor"-John Manley, Sr. Equity Strategist , Citi Smith Barney
Friday, May 15, 2009SUSIE GHARIB: Our "Market Monitor" guest tonight expects the stock market to move higher over the next six months. Joining us now, John Manley, managing director of global wealth management at Citi Smith Barney. And John, so nice to have to here at the exchange.
JOHN MANLEY, SR. EQUITY STRATEGIST, CITI SMITH BARNEY: Great to be here.
GHARIB: Well, we see that the economy is struggling. So are corporate profits. So how do you see if the stock market is going to go up?
MANLEY: Well the market has gone up but I think it's for the improvement. I mean the market goes on the rate of change and I think what's happened now would be coming inured to the idea that any economic weakness, any undue or unwanted economic weakness will be met with stimulus. I don't think weakness or stutter in the economy is going to pull us back so much. I think the risk comes six or nine months when the economy starts to recover. I think between now and then we're at valuation still allows to make a decent amount of money.
GHARIB: The markets are up now. The Dow at least is up more than 20 percent over the last couple of months. How much higher do you see it going between now and the end of the year?
MANLEY: I can see the S&P hitting 1000 by the end of the year which is pretty good from here. It's still an investable amount. We'll have to worry about what happens after that, but I think there's still enough just coming back. We're only back to where we were three, four, five months ago where we just barely undone what we done since January. I'm not so sure that should have happened. I think things were actually stabilizing in the first quarter and it was a terrible quarter. So the bounce back is just that, a bounce back but I think there's some more on top.
GHARIB: Since the last time you were here which was back in October, we have gone through a very difficult path. So some of the recommendations you made back then struggled. Kimberly-Clark (KMS) was one of your recommendations as well as Conagra (CAG). Are those stocks still in your portfolio?
MANLEY: Well Kimberly would be one of my top recommendations. It's still a very high quality company. We were playing the idea that asset and prices of commodities will be coming down and Kimberly should benefit from that. Stocks didn't benefit as much as we should have. Conagra I think is still a good story. I think that would be among the top recommendations right now. That's simply, it's a turn around story that I think we got a little bit early but we haven't seen any real downside. It's kept pace with the market and we've seen in the most recent quarter signs that it is working. Costs are coming down. It is a food distribution -- first I think food commodity prices are still under control. They consolidated a few industries. They are trying to bring down their costs. And I think that's the real key for them. If they can bring down their costs on an operating level, I think they can show better profits.
GHARIB: Let's get a look at your fresh stock recommendations. At the top of the list, you have Hewitt Associates. The ticker there is HEW. What do you like about this stock?
MANLEY: Hewitt is one of the leading outsourcers, one of the leading consultants in the United States, in the world. And I think story here is they would, with the healthcare system changing, with COBRAs changing, they tend to pick up a lot of market share and I think you will see signs of a consolidating industry. It's cheaper for foreign firms to use or to do it themselves.
GHARIB: Back to international, another healthcare kind of company, medical instruments, ticker (BAX).
MANLEY: I think Baxter is a wonderful story for playing the increased spending that we're going to see for government on medicine. You can't play the big drug companies because they have got overhang. It's hard to play the HMOs. I think Baxter gives you very good story in terms of new products and leverage on top of the old products.
GHARIB: Let's go down the rest of the list. Corning Glass (GLW). What do you --
MANLEY: It's a great store. (INAUDIBLE) What you had if you had reduced inventories are going to come back. You have reduced capacity and you have continued demand. I think it's a wonderful combination for a stock that's down from where it was a year ago.
GHARIB: It was $27 last summer and it's now 14. So what is your target on that?
MANLEY: I think it can go back towards the old level. I don't know if it gets there right away or within the six to 12 month period but I think there's a great story because the demand for flat panel TVs, demand for any kind of screens is going up and with changes that are going to happen, the stock down. As I said everything else down, it's a great story.
GHARIB: CVS is the other one (CVS). That's the drugstore company that so many of us are familiar with. Ticker symbol is CVS.
MANLEY: Again, consolidation. They're putting a few corporations together. They're achieving we think economies to scale. It is not so much a turn around story as a consolidation of these industries to gather more efficiencies as they go forward. And I think again, not a particularly boisterous economic story but a wonderful story in terms of getting to the bottom line without having to have a big top line growth story.
GHARIB: Do you own any of these, any disclosure?
MANLEY: I do not.
GHARIB: Is there any one guiding principle that ties together all these recommendations in terms of your investment strategy?
MANLEY: I think it's the idea we're looking for individual stories. It's almost as if they're not tied together. They're all good companies. They're all companies we can live with, different sizes. But they're all well managed. They have strong cash flow and I think that cash flow is probably, if I had to pick one stream (INAUDIBLE) .
GHARIB: John, thank you so much for coming on the program. We appreciate it. My guest tonight, John Manley, managing director of global wealth management at Citi Smith Barney.
