"Market Monitor"-Robert Stovall, managing director and strategist at Wood Asset Management
Friday, July 31, 2009JEFF YASTINE: Our guest market monitor this week thinks the stage is set for a rebound in the U.S. economy and investors should buy accordingly. He's Robert Stovall, managing director and strategist at Wood Asset Management and Bob, welcome back to NIGHTLY BUSINESS REPORT.
ROBERT STOVALL, MANAGING DIR. & STRATEGIST, WOOD ASSET MANAGEMENT: Thank you, Jeff. Thanks for having me.
YASTINE: You know, the Dow has gained about 40 percent in not quite the last five months or so. Does this rally still have legs? Can we move higher?
STOVALL: I think so. Yes, the rally has been surprisingly consistent. We had a down dip in early July, but July was a very good month, up unusually about almost 20 percent. And so I think we can expect to bump along the way, but I think we're going to move from a cyclical to a secular bull market, the longer term bull market, as time goes on.
YASTINE: And so you think that the economy is bottoming here, even if we haven't quite heard the bell get rung yet?
STOVALL: No, there's a lot of problems still ahead, as we all know. I think unemployment will be a problem for quite a few months. The reason earnings are so good is that companies are not increasing sales much or at all but they're cutting costs, meaning layoffs. The news about layoffs, employment and other things are not good but still underneath it all the economy is moving towards recovery.
YASTINE: When you were last on the program with Paul, that was back in late February, of course the market was still falling, but you gave us four picks at the time and let's review some of them. The first two were CONSOL Energy (CNX) and FPL Group (FPL). They, of course, have done wonderfully since that time, since you recommended them. Would you stay with these?
STOVALL: Yes, I told the folks then that I usually don't suggest averaging down but I thought the bear market was about to end. Averaging down made sense, and I thought there would be a recovery and that's what we've had (INAUDIBLE) with both of them.
YASTINE: And then let's look at the next following two here, McKesson (MCK) and Teva Pharmaceutical (TEVA), again, nice gains there as well.
STOVALL: Yes. I'd stay with them, all four of them.
YASTINE: If we're to believe, as you were saying, the economy is bottoming here, where would you be putting money to work? What are the stocks that you're bringing with us now?
STOVALL: I have four new ones for you, Jeff. One is a conservative insurance company called Chubb, C-h-u-b-b. CB is the symbol. It has good risk management and good record, paying a nice dividend. All the stocks I like pay dividends. And it's a low multiple and I think the earnings are on the way up.
YASTINE: So you're looking in this case not for a giant home run or something that says nice and steady in this case.
STOVALL: Yes. I've been in the game 55 years. I'm a practiced singles and doubles hitter. I rarely swing from the benches, Jeff, but I like to be lucky. I like to be lucky.
YASTINE: Speaking of lucky let's look at your next pick, Goldman Sachs (GS).
STOVALL: Goldman Sachs is a very aggressive leader in investment banking mergers, market trading. It's controversial. It's known as a company that's too connected to fail. I think that's probably true and I think if you want to play, if that's the word, improving markets, high volumes, Goldman Sachs is the best way to go.
YASTINE: And the symbol GS there. Let's move onto the next one, Norfolk Southern (NSC).
STOVALL: Yes, that's a railroad company. It was having somewhat of a slow year because auto production is way down and so is general manufacturing. But I think that -- I can see from the railroad car load that they're improving, and the coal business will increase as demand increases, as factories start up again. And I think that's a good value stock. It's not expensive, again, pays a nice dividend.
YASTINE: And your final pick here, Raytheon (RTN), a defense pick.
STOVALL: That's right. It's not a popular sector right now, Jeff, but they are in electronics and surveillance systems. They don't make heavy hardware like battleships and airplanes but they're in all sorts of programs globally, big, foreign business and I like that one, pays a dividend, has nice earnings.
YASTINE: Bob, do you have any disclosures to make for us with these four new stocks?
STOVALL: Yes. I own each and every one Jeff and through the Wood Asset portfolio in which I have investments.
YASTINE: We'll see how it goes as we look forward here. Bob, thank you for coming on the program.
STOVALL: Thanks for asking me again, always good to be with you.
YASTINE: Same here, our guest Bob Stovall, managing director and strategist at Wood Asset Management.
