"Street Critique"- Patrick O'Hare, Chief Market Analyst Briefing.com
Wednesday, July 15, 2009JEFF YASTINE: Tonight's "Street Critique" guest says it's still too early to get excited about an economic recovery. He's Patrick O'Hare, chief market analyst at briefing.com where he writes the bargain hunting column. Pat welcome back to NIGHTLY BUSINESS REPORT.
PATRICK O'HARE, CHIEF MARKET ANALYST, BRIEFING.COM: Hi, Jeff, thank you.
YASTINE: First give us your sense of the markets today, the Dow up 250 plus. The NASDAQ gaining 63.
O'HARE: Earlier in the week the S&P was down four straight weeks or about 7 percent so we think the market got some of its earnings-related angst out of the way ahead of the actual reporting period. So what we witnessed we believe was more of a relief trade at work over the fact that earnings were coming in better than feared and Intel specifically more than appeased the market's concerns with its second quarter report and guidance. Yet when you stop to consider at the midpoint of its third quarter revenue guidance, it's still 17 percent below the year ago period. It's clear that Intel is still not operating in a normal environment ands and that's a bit daunting to us given that we're 18 months into this recession. So we wouldn't get too carried away with what we're seeing so far.
YASTINE: In other words, still be patient if you're somebody who's looking to try to get money into the markets. You got to wait around a bit.
O'HARE: Given the run we've had off the March lows, yes, we would agree with that.
YASTINE: You write the bargain hunting column for briefing.com. Give us your sense, what's your thoughts here on how you define a bargain.
O'HARE: To start essentially from a top-down perspective, I'm looking at the broader economy and based on where we believe the broader economy is headed, we then go down in specific sectors and to industry groups. Specifically one of the bigger value-oriented metrics in mind is the price to earnings growth ratio, which is the P/E multiple divided by the growth rate.
YASTINE: What's your thought here as far as if you had to pick one bargain, what would it be?
O'HARE: Sure. Well given the top-down view here and our outlook that isn't quite as rosy as the market's trading on Wednesday suggests it should be, we look to the deep value-oriented discounter, Dollar Tree Stores. The symbol is (DLTR) has done well very well through this recession period and we think the unemployment rate projected to hit double digits over the very near future here. We think it's in a good position to continue to benefit from the trade-down effect given that the consumer remains pinched by still depressed asset prices and very limited wage growth.
YASTINE: The stock has had a tremendous run in recent months and indeed over the past year or so. Do you think there's still room for the stock to go further given some time for these gains to digest?
O'HARE: Sure. It's probably going to move with the ebb and flow of the market so in other words, when you get a good up day here that hinged on favorable prospects for the economic recovery in the market and the stock is likely to under perform and vice versa when that view changes. The stock because it has had a good run probably going to settle down here a little bit, but ultimately given where we think the economy is headed in the second half of the year and beyond, we still like its prospects here for the long-term investor.
YASTINE: Briefly, I saw something of the CEO selling a big chunk of stock. Is that something to be concerned about?
O'HARE: Not really. It's prudent given the run that the stock has had, he's going to certainly take some money off the table and we won't fault him for doing that. Not a lot of other insiders selling on top of that. So we're comfortable with that happening right now.
YASTINE: And Pat, any disclosures to make for us regarding Dollar Tree?
O'HARE: No, I do not own stock at this time.
YASTINE: Pat, welcome, thank you for coming back on to the program.
O'HARE: Thank you, Jeff.
YASTINE: Our guest, Pat O'Hare of briefing.com.
