6 Stock Picks for a Weak Market - Barron's Interview

Barron's interviews Legg Mason (LM) value investors Harry Cohen and Scott Glasser, whose Legg Mason Partners Appreciation outdid the S&P 500 by nine points over the past year, despite losing 0.69%.

They say the time to get bearish was a year ago -- now it's time to be cautious. Financials will not bottom until investors "start thinking in terms of absolute losses and really get scared." Energy, industrials, agriculture and materials - not financials - will lead the market higher, although it doesn't seem to have bottomed yet.

Stocks they like:

• Travelers (TRV) - trades at just 1.1x book value, despite "the best management in the property-and-casualty insurance business." It has a pristine balance sheet.
• Newfield Exploration (NFX) - it's up 30% for the year, but still underappreciated by the Street which sees it as the risky offshore driller it once was and not the predictable domestic E&P it has become. More generally, E&P firms will heat up before the presidential change, after which it will be much harder for energy companies to do deals. ExxonMobil (XOM) is a likely buyer.
• Kimberly-Clark (KMB) - innovative products; strong international sales; top-notch management.
• DuPont (DD) - has dumped slower-growing units and is focused on agriculture; aggressive share buybacks and dividend increase.
• PPG Industries (PPG) - once a strongly cyclical company, its coatings business is seeing higher margins and more consistent earnings.
• Kraft (KFT) - dominant franchise; lots of room for margin improvement, asset sales, buybacks and dividend increases.

Comments

[funfun:]

The stock of this shrunken chemical conglomerate is selling at 1997 prices. And the very same mediocre Management that has brought shareholders a decade of decay remain firmly entrenched in Fortress Wilmington, larding themselves with outsized pay and perks! ...funfun..

2008 Jun 22 04:15 PM

[whidbey:]

ELi

I SAY CASH WHEN A CRASH IS NYE. Ben plans to talk one way and stand still, Hank is after regulation after the doors are off the barn, Congress can not spell Deep, must less recession. Cash my dear Eli, only Cash. Best. Hu

2008 Jun 22 08:48 PM

[grinninbrit:]

The time to be a bear was a year ago, and now its time to be cautious they say.... then they point to energy and materials as the future leaders. I'd say the time to be a bull on energy and materials was a year ago, and now its time to plan an exit strategy.

2008 Jun 22 11:55 PM

[Pfloyd234:]

Have you tried KRAFTS new salad dressings? Especially the Ranch? AWFULL!!! I don't know what they were thinking!!!! Its gonna hurt em I tell ya!

2008 Jun 23 05:44 AM

[bindlepete:]

Ben has decided to save his buddies in the banks with the public's monies- new job next year and Hank wants the smae for Wall Stree but why should we trust him with reorganization of regulation considering his duplicitous record so far? Me first , my friends next and the public way back there behind GWB, who gave me my tax break.

2008 Jun 23 11:19 AM

[bindlepete:]

Ben has decided to save his buddies in the banks with the public's monies- new job next year and Hank wants the smae for Wall Stree but why should we trust him with reorganization of regulation considering his duplicitous record so far? Me first , my friends next and the public way back there behind GWB, who gave me my tax break.

2008 Jun 23 11:19 AM

[Norman Lepo...:]

Good article and commnets. I like the one about KFT salad dressing and I agree. I do not like KFT anyway.

2008 Jun 23 11:34 AM