6/07/02: Market Monitor-Jeffrey Everett,CIO, Templeton Global Advisers
PAUL KANGAS: My guest market monitor this week is Jeffrey Everett, the Chief Investment Officer for Templeton Global Advisors. And great to see you, Jeff.
JEFFREY EVERETT, CHIEF INVESTMENT OFFICER, TEMPLETON ADVISORS: Thank you, Paul.
KANGAS: You know, the last time you were with us in mid January, you didn't lie the U.S. market at all. You thought it was overpriced. It was up around 9,900 in the Dow and 19, almost 2,000 in the NASDAQ. You made good calls by staying away. But hasn't this rather precipitous decline interested you? Do you see bargains developing, especially after a week like this?
EVERETT: We do see bargains developing. And our analytic team, which does research by industry around the world, sees several bargains in the U.S. right now.
KANGAS: Well, we'd sure like to be informed of what you think is good.
EVERETT: Yes, one of the areas that really intrigue us, always has, are areas that investors are giving up on. One area that they're giving up on right now is pharmaceuticals. And you take your pick of the litter, almost. We like a few in particular. Strong balance sheets, good dividend yields, well cover and really given up for dead, cheaper than they were in 1992 relative to the market. That sector is very, very interesting to us at this time.
KANGAS: Give up a couple of favorites.
EVERETT: Bristol-Myers (BMY) is one. Pharmacia (PHA) is another. Bristol-Myers, by the way, is 50 percent below where it was September 11.
KANGAS: Oh, they're really taken it on the chin.
EVERETT: Yes, so it's really been hit hard.
KANGAS: So BMY is a favorite at this level.
EVERETT: Yes.
KANGAS: It's got its problems.
EVERETT: PHA, as well, Pharmacia.
KANGAS: Right.
EVERETT: They do have their problems but, again, our job is to identify stocks with a three to five year time frame. Bristol-Myers clearly undervalued if you're a patient investor and that's where we've made our best returns for shareholders.
KANGAS: Well, in mid January when you were with us you liked Ace (ACE), the big Bermuda-based insurance company. It was around $35 at the time. It went to $45 in the interim since you were last with us. And now it's back to around $33 or $34.
EVERETT: Yes, Ace has been an interesting story because one thing they have done is benefit from the improved pricing in the property casualty industry. But what they did was they didn't show that to investors. They took a lot of the gains, improved the balance sheet so investors wanted to see the earnings come through. They didn't come through as investors would have liked.
KANGAS: Do you still like it at this level?
EVERETT: We still like it a great deal.
KANGAS: OK. Anything else in the U.S. market?
EVERETT: Dow Chemicals (DOW), a great story. The number today on the economic side was much better than we expected.
KANGAS: True.
EVERETT: And Dow Chemical is a tremendous way to play to improved economic recovery in the United States.
KANGAS: OK. Now, the last time you were with us, you liked Asia, especially Hutchison Whampoa (HUWHY). How is that stock faring?
EVERETT: Yes, Hutchison's been up slightly since we spoke last. But the interesting point is Asia continues to be an area which is well overlooked by investors. Tremendous shopping ground for a value oriented bargain hunter, as Templeton is, and Hutchison, along with a lot of other stocks out there, very interesting growth stories at very attractive prices.
KANGAS: Any new recommendations in the Asian market? This is Hong Kong, of course, for Hutchison.
EVERETT: Sure. An interesting one which does have an ADR is South Korea Telecom (SKM), SK Telecom it's called. It trades under SKM in the U.S. Twelve times earnings, 60 percent earning growth this year, 15 percent next year, 53 percent market share in Korea. So it's a great way to play an interesting business, wireless, with a leading company at a very attractive price.
KANGAS: Now, in Europe in January you liked Adidas and that's fared very well, as I recall.
EVERETT: Adidas has done well. Interestingly, the World Cup has certainly helped its visibility with investors.
KANGAS: Oh, yes.
EVERETT: But fundamentally, as we mentioned, they're doing the right things to improve shareholders returns. That's what we like.
KANGAS: You still like it?
EVERETT: Yes. Europe is still very much about shareholder improvement, restructuring. Several names fit the bill. Volkswagen is a name which U.S. investors can buy. It fits that bill very nicely. But it comes down to a company by company effort to identify real opportunities. By no means are we saying buy Europe or buy Asia, but specific opportunities .
KANGAS: We just have a half a minute left, Jeff. But do you see the doubts about accounting credibility spreading into other markets other than the U.S.?
EVERETT: Ironically, one of the areas that the foreign markets have been spared from is accounting. They just haven't gotten into the problems that we've gotten into here in the U.S..
KANGAS: OK. And gold, you like gold after the big run up?
EVERETT: Gold has been bid up because of the India- Pakistan fears. I'm not share it belongs at this level.
KANGAS: OK. You're not recommending any gold stocks, in other words?
EVERETT: No, we're not.
KANGAS: OK. Jeff, it's been a pleasure to see you again. Thanks for coming by. My guest market monitor, Jeffrey Everett, Chief Investment Officer for Templeton Global Advisers. |
