Zain ... a great interview and some good picks!
<<Ingraham of US Global investors in BW interview sees a fall rally for the stock market, with growth stocks faring better than value stocks. He sees both the market and the economy as "juggernauts." These were among many comments Ingraham made in an investment chat on Aug. 24 presented by Business Week Online on America Online, in response to questions from the audience and from BW Online's Jack Dierdorff and Amey Stone. The following are edited excerpts from the chat. A full transcript is available from BW Online on AOL, keyword: BW Talk.
Q: Michael, if I can be forgiven for invoking Survivor like everyone else, do you see the bull market being a survivor? How will the rest of the year go?
A: Instead of survivor, I've been using the word "juggernaut," for both the economy and the overall market. We're attuned to a bullish market going forward. We look for a fall rally, and that will be tied to growth stocks as opposed to value stocks -- but not at the robust growth of prior years.
Q: Do you still like the technology sector as much as ever?
A: Yes, we firmly believe in technology, especially that which crosses several industry sectors. A good example of that are your major software companies, but also firms like Global Crossing [GBLX], which plays in both telecom and the capital-goods sectors. We look for companies that crosscut industry sectors. Another example is Enron Corp. [ENE].
Q: A few of your other favorites?
A: Sure. Another favorite of mine in tech is Micron Technology [MU], which brings to the market DRAM chips. A second favorite would be HP [Hewlett-Packard], which has a new CEO and is aggressively building on its franchise in the print industry. We also very much like Philips Electronics [PHG].
Q: Thoughts on AOL and the pending merger?
A: We believe the merger with Time Warner [TWX] represents an Old Economy idea. We're not bullish on either stock at this time. However, we like the potential of News Corp. [NWS] for its world domination in bringing new content to world populations.
Q: What do you think about WorldCom [WCOM] to buy?
A: On WorldCom, we're bullish. We're also bullish on AT&T [T]. Both companies have been depressed because of demands on their technological infrastructure. We believe strongly in WorldCom for its UUNet subsidiary -- and in AT&T for its transition to a cable company from long distance.
Q: How does one invest and take advantage of rising oil and natural-gas prices?
A: We're very excited about the energy area. You should be buying upstream oil services. That's a category of companies participating in the service and exploration of the energy industry.
Q: Can you name companies to look at there?
A: Sure. Focus on Apache [APA], Anadarko [APC], and Phillips Petroleum [P].
Q: So far, you've talked mostly tech stocks -- do you see opportunity in other sectors, and specifically what stocks?
A: Well, we're also excited about utilities, specifically Williams Cos. [WMB] and independent energy producer AES Corp. And we'd also look at El Paso Energy [EPG].
Q: Is MSFT [Microsoft] fading or short-term dormant -- your prophecy, please.
A: We've never liked MSFT, although we do own some to take advantage of its weighting in the S&P 500. We don't think it has a future as it's structured. We believe they have been a monopoly and have not played a fair game....
Q: Compaq [CPQ] is Business Week's Cover Story this week. What's your take on the company? Is there a turnaround under way?
A: We're excited about the Compaq turnaround. They continue to be in competition with Dell.... Dell is having problems with supply of components for its products. And Compaq, meanwhile, is working strongly with its distribution system. It's working well for them.
Q: Your thoughts on Lucent [LU], please.
A: They've had problems with suppliers to bring components in to make certain products. We would not be buyers. We're much more bullish on Cisco [CSCO] and Juniper Networks [JNPR]. A few others to consider are Nortel [NT] and Alcatel [ALA]. We're positive on both of those.
Q: What's your opinion of retail stocks like Wal-Mart [WMT], Home Depot [HD], and Staples [SPLS]? When is a good time to look at these again?
A: We need to get through the current interest-rate scare and also a slowdown in the economy. It is not a time to buy retailers, but Best Buy [BBY] is a stock to look at today, especially because of Sony's Playstation2.
Q: What about Nokia [NOK] in telecom?
A: We're very bullish on Ericsson [ERICY], Nokia, and Motorola [MOT] -- not just on their phone rollouts but also the fact that they're big players in China.
Q: What about Corning [GLW] for fiber optics?
A: Don't miss it. You're not too late on Corning. It's going up and up. Buy it now. We are owners, and you will not be disappointed.
Q: Baby boomers are getting old -- and have cash and voting power. Do you see this as a plus effect on health stocks in the future?
A: Yes, we see the baby-boomer trend as a plus for health-care stocks, but it's going to be an up-and-down ride. Focus on companies investing in the human genome. That's a good place to look right now.
Q: What about some of the Old Economy stocks, like AA [Alcoa]?
A: Alcoa we are invested in. It's becoming more of a New Economy stock. We're invested in a couple of other basic material groups, like mining and palladium.
Q: Are you putting the Presidential election into any of your investment calculations yet, Michael?
A: Yes, we're concerned about policy changes in health care if Gore is elected. But our worries are not high in this area. On defense, we're very interested in the idea that new defense products will come from the tech sector, as opposed to building new rocketry. We like, for example, Honeywell [HON] in this area.
Q: Is anyone still accumulating Intel [INTC] at 74? How high is it going -- any ideas?
A: Intel has a long way to go. We believe, as the largest player in the semiconductor market, with demand higher than ever, they're moving fast, and they will dominate. They are a gorilla stock. Own it.
Q: You have a cage full of gorillas, Michael :-)
A: Ha ha ha! There's a book called The Gorilla Game [by Geoffrey A. Moore], which I recommend to tech investors.
Q: Michael, you've given us great insights into a lot of stocks tonight, but you haven't really explained your stock-picking methodology. And maybe you can also explain about gorilla investing while you're at it!
A: Our methodology is strict and disciplined. We focus on multiples of earnings forecasted quarterly and annually -- looking out one to two years. When we look at the results of that analysis, we pick stocks with the strongest earnings growth.
And as for gorilla investing, that's finding companies that have rolled up all potential threats to their market share -- companies that win at all times and at all costs. The best example today is Pacific Century Cyberworks in Hong Kong -- the symbol here is PCW. And also Gemstar [GMST].
Q: Do you go along with the theory that infrastructure is the best way to play the Internet? Rather than stocks like Amazon [AMZN] and eBay [EBAY]?
A: Yes, infrastructure is THE BEST WAY to play the Internet. This will last for another three years. We're just in the infancy of the buildout, so buy infrastructure.
Q: So you see some of the other Net stocks as truly a bubble?
A: EBay, Amazon, yes, we do see as a bubble to some extent, but they're unusual companies in terms of their leadership qualities. Perhaps Amazon's jump into autos will catch on. For now, though, we believe they are part of the bubble.
Q: So, summing up, what's the best sector strategy to follow now? Tech, energy, anything else?
A: Energy especially. Utilities as well. Add tech to that, and we're bullish on those three sectors.
Q: So could you remind us of your top picks in those sectors?
A: In tech, Global Crossing, Compaq, Intel; in utilities, Enron, Williams, and AES Corp; and in energy, we like Apache, Anadarko, and Phillips Petroleum. >> |
