Garzarelli----Get ready for the bulls
Garzarelli buying early cyclicals
By Joe Mathieu, CBS MarketWatch.com
Last Update: 1:05 PM ET Dec 20, 2000 NewsWatch
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NEW YORK (CBS.MW) -- It's time to buy, according to money manager Elaine Garzarelli, who says low stock valuations and the prospect of lower interest rates will soon have the bulls herding back to Wall Street.
She is certainly putting her money where her mouth is, stacking her portfolio with one hundred percent equities.
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Updated:
12/20/2000 5:19:34 PM ET
Stocks have tumbled since the Federal Reserve chose not to lower interest rates Tuesday, but Garzarelli says investors should not be too concerned about a hard landing.
"I think the Fed is doing the right thing and the stock market should, in the next few weeks, grasp the idea that even if there is a recession it will be short lived, because they are going to ease interest rates and stock prices should be moving up." Listen to the interview.
So what's on Garzarelli's holiday shopping list? She's focused on stocks that will prosper with easing interest rates, like brokerage firms, banks and building materials. Those include companies like Masco (MAS: news, msgs), Merrill Lynch (MER: news, msgs), Charles Schwab (SCH: news, msgs) and Lehman Brothers (LEH: news, msgs).
Garzarelli also recommends other cyclical sectors like apparel, including Liz Claiborne (LIZ: news, msgs), and hotels like Hilton (HLT: news, msgs).
And then, there are the techs.
Garzarelli, who has been very weary of most high-flying technology stocks, thinks a bottom is in sight. "A lot of the technology industries will have down earnings in 2001 because of the slowing economy. Historically, after the first down quarter of earnings, the stocks start to move up. As soon as we see that, techs should go up as their earnings continue to decline through most of next year."
She thinks many of the widely held tech stocks; like Microsoft (MSFT: news, msgs), Intel (INTC: news, msgs) and Oracle (ORCL: news, msgs) will have substantial rebounds next year. "I think the S-and-P should gain 20 to 30 percent next year, and these stocks should be up 40 to 60 percent."
Texas Instruments (TXN: news, msgs) has been one of Garzarelli's favorite picks over the past year and she sees more buying opportunities before the stock begins to move higher.
Despite low valuations across the board, Garzarelli thinks there are still some investments to avoid. She shies away from metals, papers and chemicals, "They usually don't begin to rally until about six months after the Fed eases."
Garzarelli also says many sectors, which have performed well this year, will be the losers of 2001. "It's a mistake to be in electric utilities, as well as soft drinks and beverage stocks. You want to get out of the defensive, stable industries and start moving to the early cyclicals, like financials and brokerage firms."
Garzarelli, who manages Forward Funds' Garzarelli U.S. Equities Fund (FFDEX: news, msgs), sees a 99.9 percent chance of lower interest rates next month. "I think in January, we're talking about 25 to 50 basis points (lower). Stocks will react when all this gets into investors minds and the stock market will help the economy turn around." |
