Jim Awad, chairman, Awad Asset Management:
Note: Awad is generally bullish on the U.S. economy. As you read his comments below, keep in mind that Awad specializes in analyzing small and mid-cap stocks. For more from Awad, see Karen's July 24 column, "An autumn bottom for the market?"
"In the long run, the economy has been driven by internal forces, and U.S. corporations are in terrific shape. They are the low cost producer and technology leader, and it's a great wonderful profit machine. History is littered with the economic corpses of people who have been too bearish on America for too long and the profit machine will kick in.
"It may be a subdued recovery, and it may be the big averages sort of don't do a tremendous amount while profits grow in to support current valuations. But there's going to be an opportunity to make money.
"The opportunity is in companies that grow organically, that have simple identifiable business models, simple identifiable accounting, mostly in the small and mid-cap sector. Companies like Plantronics and Axcelis in the technology area, where they're down a lot and they're selling close to book value, have good balance sheets, no debt and excess cash flow generation. Also a company called Viad, which is in the payment services business, that we think is going to split itself in two, and we think can support a price 50 percent higher than it currently has.
"If you deal in small and mid-cap companies that are simple to understand, it's easier to develop confidence, and I think investors aren't going to want to own the complex companies anymore. So I can see a situation where the big averages do okay, where they stop going down and maybe go up a couple of percent a year. But there's a real premium for finding companies that can grow at 10 or 12 percent, unit growth, companies that are understandable. This is not too dissimilar from what happened in the late '70s and into early '80s.
"The wild card is Iraq. If there's something that's going to make the wheels come off, it's going to be if we go into Iraq and don't win quickly."
Plantronics
Viad
Axcelis
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