"Street Critique"-Patrick O'Hare, Chief Market Strategist at briefing.com
Wednesday, August 26, 2009PAUL KANGAS: Tonight's "Street Critique" guest says Oreos aren't the only reason he likes Kraft stock. It's got a tasty dividend, too. He's Patrick O'Hare, chief market strategist at briefing.com and author of the site's bargain hunting column. Patrick, welcome back to NBR.
PATRICK O'HARE, BRIEFING.COM: Hi Paul, thank you, nice to be back with you.
KANGAS: Why has Kraft stock landed in your bargain hunting radar?
O'HARE: Well, what we've seen in the broader market rally of course is not the most exciting stock pick, but we think it's the right stock pick at this juncture. Our belief is that the easy money from that March rally has been made so we're urging investors with conservative disposition to start looking to a name like Kraft which offers a nice dividend yield and in this case Kraft's yield is 4.1 percent, which exceeds all of its peers in its group.
KANGAS: KFT is the symbol on the big board. Do you have a target price and time frame for Kraft stock?
O'HARE: We think Kraft could move into the mid 30's over the 12 to 18 months. The company just completed a five-year restructuring program that has taken out a lot of costs and we think that there's good room here for margin expansion potential. As those margins improve over time here, it's going to increase profitability. It's going to give the company ... raise its dividends and buy back shares. So for the patient- minded investor, we think there's good return potential here.
KANGAS: Now you saw similar themes at JM Smucker (SJM) when you recommended it in May and let's look at that chart. It's up 43 percent since then. I have to congratulate you on that and some of your other recent calls. For instance in mid July you liked discount retailer Dollar Tree and to this very day with very strong earnings, the stock is already up almost 14 percent from the time of your recommendation. And on March 25th you said the spiders were the best way to play the recovery. You were right on. They're up almost 27 percent. Do you still like these securities as long-term investments Pat?
O'HARE: Sure, I think they are all still attractive as long-term investments. But I should put the caveat they have had some tremendous runs here at a pace that's not going to be sustained. We would urge investors to take something off the table here. These gains just aren't going to continue like we've seen in the past several months.
KANGAS: All right. But do you feel that we are in bull market or is it still one of these rallies in a bear market that a lot of people still think?
O'HARE: We're in the camp that it's a cyclical bull market within a secular bear market. So like I said the easy money's been made here on this rally. We're not as optimistic on the economic recovery as the stock market would like for us to believe we should be. We just don't see that V-shaped recovery taking shape given the travails of consumer and the way that's going to keep consumer spending in the months ahead.
KANGAS: So you are saying time for a little caution here correct?
O'HARE: Indeed.
KANGAS: Pat, do you own any of the stocks we have mentioned here or have any disclosures about them.
O'HARE: Don't own any of them and no other disclosures to make right now.
KANGAS: Okay Pat it's always good to hear your ideas thanks for being with us.
O'HARE: Great. Thank you Paul.
KANGAS: My guest Patrick O'hare of briefing.com
