Note the comment about the dollar and gold near the end.
09/05/03: Market Monitor-James Stack, President of Investech Research
PAUL KANGAS: My guest market monitor this week is James Stack, President of Investech Research, based in Whitefish, Montana. Welcome back to NIGHTLY BUSINESS REPORT, Jim.
JAMES STACK, PRESIDENT, INVESTECH RESEARCH: Thank you, Paul. It`s great to talk to you again.
KANGAS: Judging by today`s sell-off, do you think the stock market is telling us that its recovery has gotten ahead of the recovery in the U.S. economy, given today`s weak August jobs report?
STACK: Well, one factor we have to keep in mind is the unemployment statistics are very lagging. Another is that we`ve been through six consecutive months of gains for all market averages. That`s something we haven`t seen since 1997. In addition, we`re heading into September, which is notably not a good month for the market. Over the past 40 years, 60 percent of the Septembers have been a down month. So I wouldn`t be surprised to see some more correction here.
KANGAS: Last February, on your last visit with us as a market monitor, you said the building blocks were in place for a new bull market. Is the foundation solid enough now to expect more gains ahead?
STACK: I think it is, Paul. Some of our technical readings in breadth, that is market participation and in leadership, have hit their best or their strongest readings in over a decade. This is a bull market. It`s a very tenuous bull market and there are sectors I think I`d definitely avoid out there, some of the high value tech sectors.
KANGAS: You mean like high tech stocks that have had a big run-up and no earnings?
STACK: The technology, I think, are priced to perfection and there`s a risk there for disappointment. You don`t have to play that momentum or that technology to gain, to make good profits in this market. Our model Investech portfolios are up over 20 percent year to date and we don`t have a single technology stock in them.
KANGAS: Well, speaking of that, you gave us six stocks to buy back in February and we have a little list of what you recommended. You liked Pfizer (PFE) and Equitable Resources (EQT), and both of those are higher. Then the second two on your list were C.R. Bard (BCR), which is way up from where it was then, and AFLAC (AFL), the big insurance company, is up a point or two. Not bad at all. And to complete the list of six, all of which were gainers, I`m proud to say for you, and I`m proud of you, Washington Mutual (WM) and WPS Resources (WPS), both nice gainers. So good job. I congratulate you.
STACK: Well, thank you, Paul. Those were all conservative picks that did well even in the uncertain market environment we had at the time.
KANGAS: You know, at that time early in the year we were on the precipice of the second Iraqi war. And you said your history, your databank, which is considerable, shows that six months to a year after wars like that, the market is always higher. Well it certainly is now. It was 7,800 on the Dow then. Now we`re up at 9,500 and all the major averages are higher, too. Are we going to continue to go higher?
STACK: Yes, I think we will see higher averages, or higher investments, by the end of this year. This bull market has good liquidity. It has good strength. The frothiness right now has me a little worried. I think we`re due for some correction or consolidation. But, again, looking at the longevity of this market, as long as we don`t see any warning flags appear, it could extend well into next year`s election. But the warning flags, I think I`d watch the long-term bond market and consumer confidence out there. Those are keys to this economic recovery right now.
KANGAS: Can you give us a few stocks, like you did last February, that are going to go up, you hope?
STACK: Well, some of our favorites -- and these are in our managed accounts at this time -- Biomet (BMET). It specializes in orthopedic products. It has a 15 percent sales and earnings growth over the past 10 years.
KANGAS: OK. All right.
STACK: It has no debt. We also like Mentor Corp. (MNT). Again --
KANGAS: These are both health related storks, aren`t they?
STACK: They are. They have good growth, no debt and Metro Corp. has a 2.5 percent dividend yield.
KANGAS: OK.
STACK: We also like EnCana (ECA). The reason, it`s one of the largest natural gas producers in North America. And natural gas prices are up quite a bit over the past year. It`s more of a defensive hedge, a defensive protective hedge in our portfolio. And the last one I`d probably toss out right now is Newmont Mining (NEM). The gold stocks --
KANGAS: You liked that before, too, in February. It`s done very well.
STACK: It`s done very well. It`s up about 35 percent year to date. But when you have a central bank, our Federal Reserve, trying to reinflate right now, one of the casualties will be the U.S. dollar. As the dollar falls, gold prices are going to be firm or move higher.
KANGAS: All right, well, I`m glad you`re constructive on the market and we`ll look at those choices of yours very carefully. I hope they`re as successful as your last bunch of choices. Thanks very much, Jim.
STACK: Always my pleasure, Paul.
KANGAS: My guest market monitor, James Stack, President of Investech Research.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED.
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