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Kirk Lindstrom has an engineering degree from the University of California, Berkeley. Following 20 years of research and development as a scientist and engineer at Hewlett Packard, Kirk turned his attention to investments where he edits "Kirk Lindstrom's Investment Letter," that... More
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  • Abby Joseph Cohen Bullish (Surprise!) 0 comments
    Aug 7, 2009 12:32 PM | about stocks: SPY, DIA, QQQ, GS
    Originally posted at Kirk's Market Thoughts as Avago's Successful IPO is Second Largest of 2009 on Thursday, August 06, 2009.

    Yesterday (8/7/09) on CNBC Goldman Sach's (NYSE:GS) senior investment strategist Abby Joseph Cohen told Larry Kudlow and Melissa Francis (Anchor Women of CNBC) they believe we are in a new bull market and the recovery will be better than many people expect.
    "We are beginning to see improvements, EVEN in the labor markets. We have many more months of difficult labor ahead even if the recession, using GDP or industrial production, is almost over."
    Larry Kudlow asked:
    #1 "are we in a new bull market for stocks?"

    #2 "Are you confident we are going to have an economic recovery later in the year?"
    Abby Cohen answered #2 first

    Point 2:
    • Labor markets will take many months to turn completely.
    • Data points for Q3 are looking quite good
    • first few months of a recovery can be much more "energetic" than people expect
    Point 1:
    • We do think that a new bull market has begun. It may prove to have begun in March of this year.
    • Not every sign is positive but we've seen an upturn
    • Inventories will prove to be very important
    Melissa Francis: You were early to predict Q3 would be better than most expected. Are you even more positive now?

    Cohen: The data for Q3 data are looking quite good. First few months of a recovery are often more energetic than people expect. "things are coming together, not just in the US but there are some other nations, primarily in Asia, where economic growth does seem to have resumed."

    Kudlow: Asked about stock market target for S&P500 target (now at about 1,000)

    Cohen:
    • 1050 to 1100 range is where we should be towards the end of this year
    • "we believe a reasonable number for next year is $75 per share" so at 1050 this is 14 times earnings.
    • "Staircase Pattern of Recovery" with market not going up in a straight line
    • Stocks should perform better than bonds
    • Of stocks, they think the more "cyclically exposed categories" that include energy, technology and "dare I say it, financials"
    • Many of us have lost track of the fact that most of these stocks follow economic growth.
    Kudlow: Are businesses now "lean and mean" enough with cost cutting for better than expected profits recovery to blast the stock markets higher?

    Cohen: "Larry, you are right on target." Things to look for:
    1. Margins held up remarkably well. Expect 2nd half of this year to show great improvements in margins.
    2. Very favorable year-over-year comparisons ahead
    3. Many of the under performing, very strained companies of a year ago are no longer in the S&P500.
    More info:

    As of August 7, 2009, "Kirk's Newsletter Explore Portfolio" is up 16.6% YTD vs. DJIA up 7.0% YTD.

    Disclaimer: I own SPY in my personal portfolio and I have a position in "Kirk Lindstrom's Explore Portfolio."
    Themes: Abby Joseph Cohen Stocks: SPY, DIA, QQQ, GS
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