Carl Marker on NBR Friday
<<PAUL KANGAS: My market monitor guest this week is Carl W. Marker, portfolio manager of the IMS Capital Value Fund, based in Portland, Oregon, but he comes to us tonight from our New York studios. And Welcome back, Carl.
CARL MARKER, PORTFOLIO MANAGER, IMS CAPITAL VALUE FUND: It's great to be here, Paul.
KANGAS: Do you think today's report showing stronger than expected consumer spending and manufacturing activity combined with the weakness in stocks and bonds are pretty clear signals that the Fed will boost interest rates next Tuesday?
MARKER: I'd say that's anybody's guess, Paul. We don't spend a lot of effort trying to figure that one out.
KANGAS: So it's still up in the air as far as you're concerned?
MARKER: Definitely.
KANGAS: How did your fair in this year's first half? Those are the latest of figures that are available. How did you do?
MARKER: According to Morningstar, we ranked in the top 10 percent of all funds in the mid-cap value category.
KANGAS: Well, congratulations. Very good performance.
MARKER: Thank you.
KANGAS: How was your third quarter as near as you can tell up to this point?
MARKER: We haven't got the numbers or the rankings yet, but we look to be somewhere in line with our category.
KANGAS: OK, now of course this year's third quarter was down just like last year's, but when you were with us last year September 18, then you said it was just a correction and the bull market still lives. How about now?
MARKER: Yes, that was a pretty big meltdown last year with the Asian contagion.
KANGAS: It was a good call though, because you said the bull was still alive.
MARKER: And it was.
KANGAS: And?
MARKER: I think there's no difference this year. This is a seasonal correction. I don't see any big problems out there and I don't see any reason to look at this any differently than last year at this time.
KANGAS: OK, let's hope you're right. You gave us some very good recommendations at the time. EDS (EDS) was 35, now it's 53. You gave us American Telephone at 43.50. It went into the 60s. Now it's back to around 40. You gave us Rubbermaid, which was merged into Newell and that did very well. Travelers merged into Citigroup, did very well. And Nike (NKE) from 37 to 57. Have you taken any profits in those?
MARKER: No, we own all those stocks, other than Rubbermaid, which after giving us a 60 percent gain because of the acquisition by newel, we took our money off the table there.
KANGAS: OK. You had two clinkers, one was Office Depot (ODP) and the other was Waste Management (WMI). Are you still in them?
MARKER: Office Depot we sold, it had a 3 for 2 stock split, and we sold it in the mid-20's in April of this year for a healthy gain.
KANGAS: OK.
MARKER: Waste Management within 6 months after we recommended it, was up from 45 to 60. Now at the price that it's at, it's a tremendously undervalued stock and we recommend investors take a look at it.
KANGAS: Any other new recommendations now?
MARKER: Yes, I have three. We like Compaq Computer (CPQ). Compaq is a $38 billion behemoth. It dominates the PC industry. And if you look at the valuations compared to Dell (DELL), IBM (IBM), Hewlett-Packard (HWP), these companies are trading at 11 times book, 15 times book. Compaq is trading at 3 times book.
KANGAS: OK. All right. CPQ on the big board, right?
MARKER: That is correct.
KANGAS: And what else?
MARKER: We like American Home Products (AHP). If you look at their earnings compared to (PFE) , Lily (LLY), Bristol-Meyers (BMY), that are all over 30 times. This company is trading at 24 times earnings, and on a price to book ratio, they are trading at 6 times book versus 15 or 14 times book for the average.
KANGAS: OK. AHP on the big board, and the last one, the other one, the third one.
MARKER: We like Loral (LOR), a good mid-cap stock, Loral Space & Communications is number two behind GM Hughes (GMH) in the satellite area, direct to home TV broadcasting, global satellite based phones and high speed Internet access.
KANGAS: And the symbol and about approximate price there?
MARKER: LOR, it is trading at 17, we think it is good, could potentially double over the next three to five years.
KANGAS: OK. We have one minute left. Question, where does the value lie in Internet stocks? That question comes from Emanuel Seco of Spartanburg, South Carolina.
MARKER: We don't see as value managers a lot of value in Internet stocks. I can tell you that they've taken a 60 to 70 percent haircut since the spring, and so there's a little bit more value there now than there was, but still we don't see enough. We like the backbone or the downstream Internet beneficiaries, such as FedEx (FDX) and AT&T.
KANGAS: All right. So, next question and the last one here. I think that the best value lines in small caps stocks. Do you agree, and which index fund would be the most attractive? That is from Dave Smith, Mesa, AZ.
MARKER: We choose to avoid the small cap area, although we'd be the first to admit there's a lot of value there right now. But because of liquidity and risk reasons, we choose to stay away from that area.
KANGAS: Which index do you like, Carl?
MARKER: I would go with the Russell2000 Index but I would actually recommend choosing a fund that has a consistent record of outperforming the Russell2000.
KANGAS: All right. Thanks very much, Carl. Great to have you with us again.
MARKER: It is always a pleasure, Paul.
KANGAS: Carl Marker, portfolio manager of IMS Capitol Value Fund.>>
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