Agreed. It will be a while before most any tech stock reaches its old high. FWIW, Larry Wachtel interviewed yesterday, thinks we may start up again in April. Read and see if you agree. I also like two of his stock picks, Intel and Compaq.
Nightly Business Report, 03/2/2001 23:36
Market Monitor: Larry Wachtel, Senior Vice President and Stock Analyst for Prudential Securities
PAUL KANGAS: My guest market monitor this week is Larry Wachtel, Senior Vice President and Stock Analyst for Prudential Securities. Welcome back, Larry.
LARRY WACHTEL, SR. VICE PRES., PRUDENTIAL SECURITIES: Thank you, Paul.
KANGAS: You know, on a number of occasions over the last week or so, including today, the stock market
looked like it was putting in a bottom, but more earnings warnings from corporate America have
undermined these attempts regularly. What will it take to turn the mark! et around once and for all here?
WACHTEL: Well, first of all, on a day by day basis we have to stay the route. You can flurry at midday, but you have to close well. Secondly, I'd like to see them put in a string of advances, two or three. But the final decline goes into this earnings price season in the last part of March when we finally get pre-announcements out of the way. That has been the plague on this market. And remember, the NASDAQ has now come down for one solid year, 60 percent. It's the worst decline for any Index in history. So you really have taken valuations down from the extraordinary down to the more ordinary. And having done that, the final work is to get down through this pre-announcement season.
KANGAS: So you're saying, then, the end of the earnings warning season for the first quarter and coupled perhaps with another cut in the interest rates by the Fed, you think that's going to happen on the 20th?
WACHTEL: Yeah, I think they'll go ! 50 basis points there. But remember, Fed action kicks in on a lag basis. That's why we had the Fed action in January and we had this goggle for February. So, you know, it's a six to 12 month lag. By the time we get into the second half the combination of an inventory work down through Fed action kicking in, perhaps some tax legislation, all this, I think, will combine to bring on a decent recovery. And we'll start to discount that in the April period.
KANGAS: OK. Now your last visit with us was nearly 10 months ago, April 28th, as a matter of fact, and you predicted that the Fed would probably boost interest rates another half percent, which was, would be the biggest move of the six they did last year. And it
came true about a month later. I congratulate you on a good call. At the same time you said that's going to cause a battle between higher interest rates and corporate profits, which has turned out to be the case. But your favorite stocks at the time, Larry,
wer! e the chip stocks and they have been killed. You liked Aetna (NYSE:AET), Cypress, Vitesse (NASDAQ:VTSS), Motorola (NYSE:MOT), Qualcomm (NASDAQ:QCOM) and they're all down sharply. I hope you got out of them.
WACHTEL: Well, I got out of some, stayed with others. I think right now it's too late to sell some of those stocks.
KANGAS: So are you buying some of them?
WACHTEL: Well, as a matter of fact I would be buying stocks like Admil (ph) and Texas Instruments (NYSE:TXN). But I think the best approach, to put your toe in the water, would be to buy stocks like Intel (NASDAQ:INTC), big blue chip natives have been beaten down, Intel, Sun Micro (NASDAQ:SUNW), Compaq Computer (NYSE:CPQ), stocks of that caliber, which have sold out, have a good name, good quality to them and then give it time.
KANGAS: I must ask you, does your firm have any investment banking relationships with any of those stocks you're recommending?
WACHTEL: Unfortunately, no.
!
KANGAS: You'd like them to.
WACHTEL: Yeah.
KANGAS: OK. I must give you due credit. You recommended Bristol Myers (NYSE:BMY) last time at the 52 level and it's now, it's in the mid 60s. That's nice. And Baker Hughes (NYSE:BHI) was, well let's see, it was, yeah, 40 -- 31 and it's now about 41. And Mid Atlantic Medical (NYSE:MME) was a great winner of yours. It was at nine and now it's around 20, a double and then some. Are you taking money off the table on any of those?
WACHTEL: I've taken some profits in Mid Atlantic Medical. Baker Hughes is getting a little bit rich here, perhaps switching to Schlumberge would be indicated.
KANGAS: OK. So you do see a little bit of light at the end of the tunnel here?
WACHTEL: That's right, Paul. You know, we've taken down $4 trillion in value and we've taken mainly into sobriety and sobriety can't be all bad.
KANGAS: Fair enough. And so you favor some of these old big blue chip high techs. Ho! w about the bond market? Any comment on that at all?
WACHTEL: Well, you know, bond yields have come down to a level where the capital gains in the bonds are not that attractive.
KANGAS: OK. I know you're a stock picker from way back and we wish you good luck.
WACHTEL: Thank you.
KANGAS: Thanks very much for being with us. My guest, Larry Wachtel, Senior Vice President, Prudential |
