HUDSON: We saw the lowest unemployment rate in more than two years and the most new jobs created in almost two years. Still tonight`s “Market Monitor” calls it a slushy economy. Mark Luschini is back with us, chief investment strategist at Janney Montgomery Scott with us tonight from the NASDAQ. Mark, you must be in the season, hasn`t snowed yet, but you`re thinking slushy. You calls this improving but not yet vigorous. Is it constructive though for investors?
MARK LUSCHINI, CHIEF INVESTMENT STRATEGIST, JANNEY MONTGOMERY SCOTT:
I think it is, Tom. We`re building a foundation, albeit slowly of a warming domestic economic climate and that`s exceeding important at any time coming out of a great recession now about 10 quarters removed and not seeing the kind of vigor we`d like to see as this junction, but nonetheless seeing sequential improvement and some positive developments on the employment front, especially though at this time it`s important giving the fact that some exogenous event could be exported from Europe or a slowdown in China that could be a speed bump to the U.S. economy when we least need it. So the strengthening of our domestic situation is important to help to sort of ward off that event.
HUDSON: A lot of folks in your position over the past six or nine
months have talked about that, decent but unspectacular growth, look for dividends to kick up the stock returns. Is that too crowded of a trade though?
It has gotten a lot of attention and it worked exceedingly well in 2011.
Believe it or not, we continue to believe though that will be an important area in which to fish for 2012 as well because if we are starting to see a slow down in global growth in a low-growth world, income is going to matter in terms of its total contribution to return investors might experience and high dividend paying stocks make a lot of sense. Now I would suggest however that utilities and consumer staples may have become crowded and therefore richly valued so as a consequence, turn your attention to dividend payers in sectors like health care, technology and energy.
HUDSON: You`ve got an energy pick for us, Chevron (NYSE:CVX) Texaco,
the old Chevron (NYSE:CVX) Texaco, now just Chevron (NYSE:CVX), CVX the
ticker symbol, $108 per share, a yield at 3 percent. What do you expect?
LUSCHINI: In a stock that`s trading for about eight times earnings, we expect oil prices to remain elevated as supply constraints continue to wreak havoc in global markets. Obviously tensions in the Middle East give us some geopolitical concerns and as well emerging market demand isn`t diminishing. So as a consequence, that should be a very profitable environment for global integrated oil companies and you get a nice coupon from Chevron (NYSE:CVX) while you wait.
HUDSON: You also like Novartis, NVS the ticker symbol, a Swiss drug
giant in the upper 50s with a decent yield of 4 percent. Give us a quick 30 seconds on this.
A Swiss-based company, we like global pharma in terms of the demographics and then as well, we think that many of the companies in the pharmaceutical industry that are outside the U.S. interestingly enough aren`t facing the same patent clip as some of the domestic global pharma are going to be facing over the next few years. So as a consequence, we think you get a little better protection and once again a handsome dividend yield.
HUDSON: Just 90 seconds left, one more pick, but I want to get to
the previous picks. The new one here, financials. You`re dipping your toe into the much maligned financials here. Not much of a yield play for this
one is it?
Not much of a yield and we know it`s been a problem for even some financial institution that have asked the government to be able to raise or begin a dividend yield. But that will be in the offing. In the meantime, we see the sectors having obviously been bombed out, have very little lob on the part of the other strategists on Wall Street and at the same time, many companies in the space are selling at 30 to 70 percent of book value.
So if we see any resumption in normalization of earnings growth, some abatement of these macro risks, we think an elevation in price to book values alone should be enough to offer for patient investors pretty significant upside potential.
HUDSON: Mark, just 30 seconds left and I want to get to both sets of
previous picks, four total. July 29th you were here and you liked Microsoft (NASDAQ:MSFT) and Wal-Mart (NYSE:WMT). Both of these shares are higher today than when you were last with us. Would you put new money to
LUSCHINI: We would. Both still continue to look cheap, both large franchises, high quality in most (ph) balance sheets and we think good growth prospects going forward.
HUDSON: You also liked energy back then and it was Conoco, COP,
ConocoPhillips (NYSE:COP). You also like gold. These have just made fractional moves. Still have money?
LUSCHINI: Most definitely, Conoco, good yields. Gold, while having sold off at the end of the year, did finish the year on a year ago (ph) basis up 10 percent and we like its prospects under negative rule (ph) interest rates and continued money supply increase.
HUDSON: Mark, do you and your clients have positions in everything
you mentioned tonight?
LUSCHINI: We do, with the exception of Novartis.
HUDSON: We`ve got Mark Luschini. He is our “Market Monitor” with Janney Montgomery Scott.