Forbes Investor Advisory Institute hosted a Financial Round Table discussion on June 30, 2007. Many of the comments were directed to the increasing globalization of both business, and financial markets.
Robert H. Stovall, CFA, is Managing Director of Wood Asset Management, a firm with $1.6 billion under supervision. Since 1985, he has been a professor of finance at NYU’s Stern Graduate School of Business. Bob is a former Forbes magazine columnist. Here's what interests him in today's market:
BOB STOVALL: Personally I've been interested in the TIPs, Treasury Inflation Protected Bonds, since they first came public some half dozen years ago. Because of current market conditions, the yields on these now are at five-year highs. So, I think there's a capital gain opportunity there. It's a spread. A spread is also wide between the TIPs and the regular treasuries. Just don't forget them.
Moving on from the TIPs, I suggest some individual stocks that appeal to me, and that we own in our Wood Portfolio.
Like most human beings, I'm keenest about the stock we've bought most recently. And one that has an oligopoistic position in the retail labeling trade is Avery Dennison (NYSE:AVY). It currently sells at around $66, has raised the dividend every year for the last 32 years, and the P/E is modest at about 15, 16 times earnings. Earnings are on the way up. It participates in pretty much everything sold at retail. They don't have the whole market, but they only have one major competitor. So Avery Dennison is a consumer stock. No matter what you buy, it has a sticker on it. So Avery is right there.
Then, in the telecommunications business, there's a spin-out called Windstream (NASDAQ:WIN) which has modest earnings, but it does pay a decent dividend that I don't think they'll cut. The dividend return on this one is 6.7%, which is kind of unusual. And I think it's probably going to be bid for in time.
The New York Times had a recent piece in their sector alert on medical devices. The largest company in this group is one we also own, Medtronics (NYSE:MDT). It has been sluggish but, according to the statistics on its activities, its product spread, the quality of its products and so on, it ranks number one by a large margin. That made me feel pretty good. The statistics on Medtronics are not too rich and the stock has not moved much, unlike many others in its sector.
We've had General Electric (NYSE:GE) in our portfolio for a while. It's been a real sleepy lagoon, a slug-abed, you might say, just about as frustrating as Pfizer (NYSE:PFE). But unlike Pfizer it does have new products. The earnings are going up, and just last week we gave an award to Jeff Immelt at NYU's Stern School of Business. He rattled through the various areas of their expansion and their focus, looking a few years out – very global and very green. I think
that stock had a major breakout technically in the market this week, and it's probably headed higher. Until it gets much higher, it belongs in portfolios where it isn't currently held.
At the other extreme in terms of size, a stock that we like and have done well with is called Petsmart (NASDAQ:PETM). As you know, in industrialized countries, where people get married later and have fewer children, they spend more money on pets than they probably should. And Petsmart has such things as doggie hotels, doggie washes, pussycat haberdashery, and all sorts of things you could spend your money on. The statistics look pretty good on it and I think the theme is also good.