Greg Forsythe, senior vice president, Charles Schwab & Co.:
Nextel
"Nextel is a growth company that's a little bit risky, but it's a free-cash-flow-positive company right now, with a reasonable valuation and improving fundamentals." Another one, it's more on the value side of the camp, would be Washington Mutual. This is kind of a low P/E, cheap, safe, stable type of company, but it continues to outperform analysts' expectations, and we view that as a positive."
Washington Mutual
"Another one, it's more on the value side of the camp, would be Washington Mutual. This is kind of a low P/E, cheap, safe, stable type of company, but it continues to outperform analysts' expectations, and we view that as a positive."
Federated Department Stores
"Federated Department Store is not really a fantastic company, but it is a great stock. And the reason we think that's the case is that first of all it's cheap. It's only selling at about 9 times earnings, yet the company has surprised analysts eight consecutive quarters by reporting earnings above expectations. And this is a superb free cash flow generator, which management is using that to pay down debt and buy back shares, all factors that we think are positive."
Kohl's (Note: Forsythe cited this as a pick to avoid, not buy)
"The flip side in the retail sector is an example of a great company which people often confuse with a great stock. So the company there I want to mention is Kohl's. A great track record and been a fast grower, but it's no secret the multiple is high. And yet what we're seeing is the first kinks that might detect they could be vulnerable to a negative earnings surprise. We see negative free cash flow. We see that their inventories, receivables, assets are all growing faster than their sales rate. That's a pattern that often precedes negative surprises."
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