Mid-Year Picks and Pans From Barron's Roundtable Part II

Barron's magazine returns to its 11 Roundtable participants, who weigh-in with their mid-year thoughts, and updated stock picks (see parts I and III)

Marc Faber

• Stock market negatives include still-inflated earnings estimates, potentially higher interest rates, and an Obama candidacy.
• He likes Japan (SCJ) for its low valuation, including Mitsubishi UFJ (MTU) and Mizuho Financial (MFG). AMR (AMR) on a predicted drop in oil prices. Gold (GLD) ("If you have no exposure to gold, start buying it here."). And shorting U.S. Steel (X), which will take a hit if the pace of building in China and elsewhere subsides.

Mario Gabelli

• Besides the housing and auto markets, which need help, there will be less financial stress in the second half of the year.
• Three themes he likes: Environmental stocks, companies with pricing power, and the following takeover possibilities: 1) Telephone and Data Systems (TDS), which has tremendous untapped value. 2) Tootsie Roll Industries (TR), controlled by the aging Gordon couple, who should be looking to sell. 3) Tredegar (TG), diaper maker which will benefit from growing child population and the use of diapers for incontinence. 4) Herley Industries (HRLY) another takeover target. And 5) Diebold (DBD), which already rejected a bid from United Technologies (UTX).

Art Samberg

• Consumer credit and commercial lending will drag the markets down this year and next. IPOs are dead.
• He likes copper, natural gas and coal. Namely: Ultra Petroleum (UPL) and Southwestern Energy (SWN), which he calls "double play" stocks. Freeport-McMoRan Copper & Gold (FCX) a lack of electricity is making it harder to mine copper. Vale (RIO) is super cheap. Halliburton (HAL).

Fred Hickey

• Hickey says things haven't been this bad since 1929. "The market will get killed when companies admit the second-half rebound isn't going to happen."
• He recommends buying gold and selling "horsemen" tech stocks (MSFT, ORCL, EMC, HPQ, AAPL, and semis). He likes Golden Star Resources (GSS) and streetTRACKS Gold Trust ETF (GLD).

Comments

[CrossProfit_:]

RE Marc Faber:
Shorting X and long GLD doesn't make sense. Probably right about X as earnings will not keep pace for various reasons, even without a slowdown in China (which we don't expect to happen anyway). However, following Faber's logic, slower growth will put downward pressure on gold as one of the side effects is lower inflation.

RE Mario Gabelli:
The Gordon couple have been 'too old' for the past seven years and at this rate will out live most of us and still control TR. Just in spite of all the pundits that have been advising them to sell, they will end up leaving it in some sort of charitable trust so that Wall Street doesn't get a piece of the action! (No knowledge, pure conjecture.)

DBD has some good competition and margins are shrinking. Brinkmanship with UTX didn't pan out as they didn't raise the bid. UTX will come back with a lower offer in six months and remind them how YHOO muddled their chances with MSFT! (Just guessing, no knowledge.)

Regarding FCX, copper prices are poised to fly again, wouldn't bet against them.

RE Fred Hickey:
What rebound is he talking about? H1 showed some pretty solid earnings in most sectors. Excluding banks and financial sectors the first half wasn't too shabby even for half the retailers. Materials and construction is up as well and housing stemmed the slide. Energy, metals & mining and manufacturing did very well, thank you. Hickey should pick up a history book and read about 1929 before doing comparisons.

2008 Jun 15 06:16 PM

[dieuwer:]

In 1982: Oil at $40, DOW at 1000.
In 2008: Oil at $140, DOW at 12,000.

In 26 years, oil increased 3.5 times, DOW increased 12 times! You tell me where the bubble is...

2008 Jun 15 09:04 PM

[whidbey:]

You know these interviews have little to do with the guest's position, they are all talking their bias and their books. Historically these Round-table have not got a good reputation as guides to future markets. We all know that the financial sector has more work to do, and that means equities in general do not do well. Gold always when the Fed is pressed to keep the windows open and the presses running. But spare us the pretense on specific stocks. Barron's is so 1980 if that recent.

2008 Jun 15 09:49 PM

[jcustom:]

Those who bet on NG will be dissapointed. The supply will surprise on the upside while the demand will be few percentage points down vs last year due to the use of more efficient equipment and due to closing industrial facilities in the auto industry and moving various manufacturing operations to China. As for UPL and SWN, particularly Ultra will require a lot of capital to fund the capex. Dilution or convertibles anyone?

2008 Jun 15 10:22 PM

[CrossProfit_:]

RE Mario Gabelli:
Correction: 'outlive' (not out live)

2008 Jun 16 04:58 AM

[R. Richard ...:]

Great comment on Barrons. That's why Eli's winnowing is useful.

2008 Jun 18 07:52 AM

[jimbobii:]

gss is ramping ops right now

2008 Jun 20 04:42 PM

[John Scott:]

Poor Fred Hickey. He just won't let go of his AAPL short. He has been losing money on it since $70/shr.

2008 Aug 14 01:14 AM