"Market Monitor"-Robert Stovall, Managing Director & Strategist at Wood Asset Management
Thursday, April 05, 2007
PAUL KANGAS: My guest "market monitor" this week is Robert Stovall, managing director and strategist at Wood Asset Management based in Sarasota, Florida. Bob, welcome back to NIGHTLY BUSINESS REPORT.
ROBERT STOVALL, MANAGING DIRECTOR & STRATEGIST, WOOD ASSET MANAGEMENT: Thanks for asking me back Paul.
KANGAS: Stocks on Wall Street are now at six-week highs. Are we ready for another setback or will the market continue to move higher in your thinking?
STOVALL: The market I think will move higher but not in a straight line. We were pretty gloomy about the market when it finished the first quarter flat dead in the big averages. But now it looks a little better. So I think a correction is likely. But when it comes we don't know.
KANGAS: OK. Your thoughts on interest rates.
STOVALL: I feel that interest rates won't change much this year unless the sub-prime loan troubles leak out into the rest of lending. Then I think the Fed would cut rates quickly. Otherwise I don't think we'll see a rate cut until next quarter -- I'm sorry, next half or even early in 2008.
KANGAS: Where do you see oil prices heading, Bob?
STOVALL: I've been saying for several years, Paul, that they are going to stay stubbornly high. The expert oil analysts have been much more optimistic about oil prices dropping than I've been. But here we have it $60 to $70 a barrel again. I think it's going to stay high because demand is going up faster than supply and our refineries are overstrained and all the rest of it.
KANGAS: Now you've said that the big-cap stocks have been laggards because they're too big to be taken over and that's what is in fashion these days. Do you see any change developing?
STOVALL: Not really. We own GE and some other big stocks in the Wood Asset portfolio. And I admire the management. I think it's the jolly green giant of the future that keeps making environmentally sound acquisitions. But it is just too big. It's not part of the new momentum which is going private or spinning off or what not.
KANGAS: All right. Now on your last visit with us in August, you had four buy recommendations. Let's see how they have done since then. AT&T was a real winner, up almost 27 percent. And Bank of America down only 2.8 percent. Not too bad there, way ahead on those two. And then the other two that you had were Capital One Financial which is off 7.3 percent and then Noble Corp. up nearly 22 percent. So the winners far outpaced the losers, but are you still with all of these four stocks?
STOVALL: That's right. I own them personally and I particularly like the momentum, the forward momentum of AT&T. And I think they're all worth holding. The delays and advances are easily explainable but we don't have time for that.
KANGAS: Do you have some new recommendations? We have time for that.
STOVALL: Yes, I do. It's hard to find an oil stock that has a great future that hasn't gone up already. One of them I like a lot is a Apache (APA) which is exploration production.
KANGAS: It's got kind of a patchy there, up and down back and forth.
STOVALL: But it's rising tops and rising bottoms. I think it's going to be all right.
KANGAS: OK, second choice.
STOVALL: The second one after that is Petsmart (PETM).
KANGAS: That stock has been no dog.
STOVALL: No dog. People love their pets. And we have more and more people living alone or live without children. And it is very good for pet and they have some real great services.
KANGAS: OK. We just have a minute left. How about some others?
STOVALL: Well, we go from there to Procter & Gamble. I think by the third quarter, there's going to be recession talk, not that there is going to be one but P&G is a great stock to have if the market slows in to consumer staples.
KANGAS: Defensive issue, in other words.
STOVALL: That's right.
KANGAS: Quickly, one more.
STOVALL: I like Tiffany. That a momentum stock. It's a control contest brewing. It's big in Japan where the earnings haven't picked up yet and I like a lot of aspects of Tiffany.
KANGAS: Very interesting. Do you own these securities yourself or have any other disclosures to make?
STOVALL: I own them all personally. I eat my own cooking. Also each one of them is in the Wood Asset Management portfolio which I also have an investment in.
KANGAS: Bob, I want to thank you for being with us once again, it's always enjoyable.
STOVALL: Thanks Paul.
KANGAS: My guest Robert Stovall of Wood Asset Management.