INTERVIEW: War, Peace and Dividends by Sandra Ward
- Highlighted companies: Quintana Maritime Ltd. (QMAR), Toyota Motor Corp. (TM), Ingersoll-Rand Co. Ltd. (IR), Enterprise Products Partners L.P. (EPD), Ford Motor Co. (F), Intel Corp. (INTC), General Motors Corp. (GM), DaimlerChrysler (DCX), Kinder Morgan Inc. (KMI)
- Summary: Interview of 92-year-old Seth Glickenhaus, whose Dorchester Fund has delivered an average of 16.5% net since 1961. Stock picks (with reasons): 1) Quintana Maritime Ltd. (QMAR): • selling at asset value • yield close to 9% • field (shipping of dry bulk commodities) with great growth and growth potential. 2) Countrywide Financial Corp. (CFC): • at 8-times earnings it is one of the great bargains. 3) Toyota Motor Corp. (TM): • young people are buying foreign cars • no retiree issues (eg. health costs) • modern plants and top-quality machinery. 3) Ingersoll-Rand Co. Ltd. (IR): • at bottom of price-cycle • solid management. 4) Enterprise Products Partners L.P. (EPD): • best and biggest pipeline company • high yield • stock making new highs • expanding • covers great territories. Outlook: • "The greatest error made on Wall Street is diversification," which leads to mediocrity and average performance. • He's negative on the economy, citing: 1) High oil prices. 2) High insurance costs. 3) People holding adjustable-rate mortgages about to be hit with big increases. 4) Housing market decline. 5) Huge income disparity. • "We are clearly at the end of [interest] rate increases." • Companies are better managed today, and adjust to problems faster. • Federal spending is dismally distorted toward military; talk of deficit reduction is absurd. • War spending takes money away from constructive parts of market. • He thinks the public is fed-up with Bush. • Oil might hit $200—in 2200! • Japan and Europe will stagnate; India and China will continue to grow. • He's more worried about deflation than inflation.
- Quick comment: The foreign vs. domestic auto-makers issues were looked at by the WSJ this week. In our comments we note those who agree, and those who take issue with this sentiment. Eric Dellith argues that while the price of CFC may be right, the market isn't. Accenting Glickenhaus' fear that pending mortgage adjustments will be disastrous to some homeowners, CFC is sending letters to borrowers who have been making only the minimum payments warning them of a coming increase, and advising them to "explore alternative refinancing options sooner rather than later." They provide an example of a California homeowner who has been paying less than the minimum on a 7.6 percent loan soon to be facing a payment that is twice what he is currently paying. Jim Cramer joins Seth in recommending IR, saying "[their equipment] is the kind of stuff you must have when the economy's heating up."