On Nightly Business Report, Randall Eley, who has been right on with this market says he likes MO....thinks it is still undervalued. Interview below:
03/09/01: Market Monitor: Randall Eley, President Of The Edgar Lomax Company
PAUL KANGAS: My market monitor guest this week is Randall Eley, President of the Edgar Lowmax Company (LOMAX), an institutional money management firm based in Springfield, Virginia, just outside of Washington, D.C. And welcome back, Randall. RANDALL ELEY, PRESIDENT, THE EDGAR LOMAX CO.: Thank you, and it's good to see you again, Paul.
KANGAS: You know, on your most recent visit with us last September, you were very bearish on the stock market. You even suggested the Standard & Poor's 500 Index could fall some 200 points. Well, it has happened. So I compliment you on that gutsy but very correct call.
ELEY: Thank you.
KANGAS: You know, given the beating the market has taken, especially NASDAQ, down 3,000 points or almost 60 percent from just about a year ago, are you taking on a more bullish opinion now?
ELEY: In the short-term. I would not be surprised at all in the next quarter, maybe four to six months, to see the market find something of a temporary bottom. But long-term, I think this is still a bear market.
KANGAS: So in other words, you're talking about a bear market rally. Sometimes they can be very deceiving and very strong, correct?
ELEY: That's right. This one, I think, could be unusually strong, because a particular note, I think, is the fact that the Dow Jones Industrial Average is acting very well. In fact, if you notice, it has not hit a new low, as the NASDAQ and the S&P have this year.
KANGAS: That's right.
ELEY: So we could see a new high in the Dow, I think and yet still see all of those averages turn down and go to new lows by the end of the year.
KANGAS:Well, I'll tell you one thing, that our viewers have to be pleased if they took your advice and the stocks you recommended last September 22nd. Philip Morris (MO) at the top of the list was at $27. It's now $51.75. What are you doing with it, taking profits?
ELEY: It's unbelievable even to us, but we still think that stock is under valued. We're holding it.
KANGAS: You liked International Paper (IP) at $29. It's now $41.
ELEY: That's right. That's the only one we're selling of the group. It moved up faster than we expected and we're real believers in once we've gotten full value out of them we sell them.
KANGAS: OK, Chevron (CHV) at $84. It's now about $93. You take a little profit or stay with it?
ELEY: We're staying with it.
KANGAS: OK. And Dow Chemical (DOW) was your other recommendation, just under $25, now $36.
ELEY: We're also keeping that.
KANGAS: You only had one little stock that went down in that group of five that you recommended and that was Eastman Kodak (EK) at $58. It's now about $45, $46. What are you doing with that?
ELEY: We like it even more and we're buying more. And we would also add to that list, Paul, General Motors (GM) and McDonald's (MCD). So the fact is, I think we have a special opportunity with Eastman Kodak and we have a chance to pick up some other cyclical stocks that have very strong core businesses.
KANGAS: Well, I know that you only buy stocks in the Standard & Poor's 500 Index.
ELEY: That's right.
KANGAS: That's part of your policy, and those four or five that you gave us did very well last time. But the question is how about technology? Are there any technology stocks that have been beaten down in the S&P 500 that you think are particularly attractive here?
ELEY: We like Hewlett Packard. I would not advise, though, an individual holding a number of stocks I'm recommending on this show, I would not advise buying Hewlett-Packard as a part of that list. But it's the only name of the tech stocks, so to speak, that we think is under valued at this point.
KANGAS: You know, I couldn't help but notice that your Edgar Lomax Fund did rather well in the fourth quarter of last year. Is that true? Tell us about that.
ELEY: Oh, that's right. In fact, "Baron's" (ph) reported the first week in January that the Edgar Lomax Value Fund was the number one best performing fund in the fourth quarter in the Lippo (ph) universe. So we're very proud of that, of course.
KANGAS: Well, I compliment you on that. That's very, very good, indeed. But you still feel we are in a bear market-
ELEY: That's right.
KANGAS: -- except, perhaps, for some of the blue chips.
ELEY: That's right. And the reason is the valuations are still too high. The Dow's P.E. ratio is 21. The S&P's P.E. ratio is about 24. Long term those average P.E. ratios are 14. So you see, Paul, long term we've got a little ways to go.
KANGAS: Well, you're in a tough position because your policy is always to be 100 percent invested in stocks, correct?
ELEY: That's right. Precisely.
KANGAS: And those picks you gave us early on are the ones that you think that will perform best over, let's say, the next six months?
ELEY: That's right. And overall our policy is to try to put together portfolios with P.E. ratios not much more than 14 or 15.
KANGAS: Right. Are we in a recession in your opinion?
ELEY: I don't know and fortunately I don't think we have to decide that question and hopefully we're not. But sooner or later, we may or may not be, but there are companies like these old line Industrial companies that are going to make money no matter what.
KANGAS: Well, that's what you said last time, buy those stodgy stalwart firms. It turned out rather well. I wish you luck.
ELEY: Thank you very much.
KANGAS: Thanks very much, Randall. My guest, Randall Eley, President of the Edgar Lomax Company. |
