10/30/00:
Running With Wall Street Bull Joe Battipaglia
SUSIE GHARIB: So what's next for stocks? Joining me live
here in New York is Joe Battipaglia, chief investment strategist for Gruntal and
company. Hi, Joe.
JOSEPH BATTIPAGLIA, CHIEF INVESTMENT STRATEGIST,GRUNTAL
& CO.: Good to be with you, again.
GHARIB: Good day to be talking about the stock market, huh.
BATTIPAGLIA: Yes indeed.
GHARIB: All right. Your targets for the Dow: 12,500 by the
year end. That means we're about 2000 points away, give or take. NASDAQ,4300.
You were - you've just revised this number - you were at 5500 on the NASDAQ. Still
we're 1200 points away. Are you going to hit these targets?
BATTIPAGLIA: Well, if we talk about it in percentage terms,
we have a 15 percent gain in the Dow Jones and a bit more in the NASDAQ. Very
doable in November and December.
GHARIB: For where - where are you talking about?
BATTIPAGLIA: Well, to get from where we are now, to the
4300. And the reason why it will happen is because the earnings for the third
quarter will end up being better than expected, on balance. The election will
be behind us. Energy prices are understood in the marketplace, and the tone of
the market is improving. Indeed, I think the worst of all fears have played out
in the valuation adjustment that's occurred, and now the investors are going to
look at this as an opportunity to buy the stocks that they want to own.
GHARIB: Technology stocks took this market, this bull market,
on the way up. Will it lead them back up, especially, given the kinds of warnings
we've gotten from NorTel (NT), from Intel (INTC), from Apple (AAPL), and now,
this downgrade on Cisco's (CSCO) stock today.
BATTIPAGLIA: What technology companies provide in the expansion
of the economy is fast growth in earnings. We are now going to distinguish between
those with the fastest growth, those with the least quick growth, and we're going
to buy them accordingly. And if you look back over the last ten years, it was
either technology or health care or financials that led the market. I suspect
through year-end, the financials and the pharmaceuticals might provide the best
leadership; the techs will provide a strong second; and then in the new year,
we'll get back to sorting them out.
GHARIB: So are these technology stocks, all the warnings
we're getting, is this a temporary problem you think, or is it an indication that
the economy is really slowing down?
BATTIPAGLIA: Well, there's two elements here. One is over-valuations
for many of these groups, particularly, for example, fiber-optics, where the valuations
couldn't be supported by the growth rates. On the other side of it is company-specific
problems, having to do with component shortages, picking the wrong business segment
to go after, in the case of Lucent (LU). But the combination of all those things
have spooked the tech investor in the third quarter. And I think that's behind
us.
GHARIB: Yeah, talk about spooking Cisco's stock today, down
5 percent. Some technicians are saying that it's broken through $50 which was
the key support level. What is your view on Cisco's stock?
BATTIPAGLIA: I think the stock is still pricey relative
to where the earnings are going to come in. They're doing everything right on
an execution basis, but it came down to valuations. We couldn't support those
high valuations, and that's why we've had this process - as painful as it's been
- through this year, of correcting those speculative excesses. But now you'll
notice, for example, Microsoft (MSFT) is a relatively strong performer. Intel
(INTC) is building a base. Some of the computer companies, likes the Dells (DELL)
for example, have also started to improve.
GHARIB: Going back to Cisco though. It's been a bellwether
for the tech sector. It's coming out with its earnings a week from today. If those
earnings are strong, what kind of impact might that have on the technology sector
and the stock market?
BATTIPAGLIA: It should have a very positive effect on the
stock, on the group, and on the NASDAQ, because here, indeed, is the bellwether,
delivering on the earnings. However, you won't see the stock move towards a new
high. You'll see it start to improve from here, and the broader marketplace and
technology perform better because it will speak volumes about what business conditions
are for technology.
GHARIB: OK. Somebody has got new money. They want to put
it to work. What would you recommend at this point?
BATTIPAGLIA: A balanced portfolio approach has always worked
for us.
GHARIB: Specific names.
BATTIPAGLIA: Well, we have 40 percent in technology, which
would include Microsoft (MSFT), it would include Intel (INTC). We take a hard
look at Telephone (T) and WorldCom (WCOM) because they have been beaten down so
far. We'd also be 20 percent in health care. The big pharmaceutical names make
a lot of sense, the Mercks (MRK) and the Johnson & Johnsons (JNJ). And in
the financials, we'd include Citigroup.
GHARIB: OK, real quickly, we just have a few minutes. The
election next week, Gore or Bush, which one would be the best for Wall Street
in terms of the stock market?
BATTIPAGLIA: Well, Susie, unfortunately, the fact that we
don't have a majority for any one candidate means someone is going to be disappointed.
My suspicion is what Wall Street really wants is gridlock, when all is said and
done. No big policy shifts, and I think that's what we're going to get in the
end.
GHARIB: Well, it's been good in the last six years; maybe
it will work out for the next six years.
BATTIPAGLIA: Precisely.
GHARIB: Thank you so much, Joe. Always a pleasure to have
you on the program. My guest tonight, Joe Battipaglia, chief investment strategist,
Gruntal and company.
Nightly Business Report transcripts are available on-line post broadcast.
The program is transcribed by FDCH. Updates may be posted at a later date. The
views of our guests and commentators are their own and do not necessarily represent
the views of Community Television Foundation of South Florida, Inc., Nightly Business
Report, or WPBT. Information presented on Nightly Business Report is not and should
not be considered as investment advice. © 2000 Community Television Foundation
of South Florida, Inc.
10/30/00: The Business Of Cashing In On Campaign Contributions
SUSIE GHARIB: The election next week will go down in history
as the most expensive ever. Both parties are raking in donations from businesses,
interest groups and labor unions. But the economic realities of campaign finance
also reach further down the political system. Tonight we begin a special series
on "Campaign Finance" with a look at one Texas town, and why it's playing
the Washington money game. Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: For
years, traffic across the Mexican border near McAllen, Texas has been growing
steadily. But now, with the North American Free Trade Agreement, there are more
trucks than ever crossing the Rio Grande headed north. It's part of Mike Allen's
job to put more of those trucks on the road. Allen has lived along this border
for more than 20 years - first as a Catholic priest, now as a corporate recruiter
- president of the McAllen Economic Development Corporation.
MIKE ALLEN, PRESIDENT, McALLEN ECONOMIC DEVELOPMENT CORP.:
All this land here is developed. This is going to connect into I-69.
GERSH: But to keep growing, Allen says the Rio Grande Valley
needs more than a billion dollars in federal money to widen roads and build overpasses,
transforming existing highways into the southern leg of Interstate 69, a highway
that will eventually extend from the Mexican border to the Canadian border.
ALLEN: For the lives of the people, it's going to enable
us to attract industries. You know, we compete with other parts of the world that
have jobs. We have 16 percent unemployment, so an interstate highway is also like
education - it's very critical to our development.
GERSH: But so far, this is all there is to I-69 in south
Texas: just a sign by the side of the road. To make sure this highway becomes
a reality, the business community of the Rio Grande Valley have been forced to
become sophisticated players in Washington, spending hundreds of thousands of
dollars on lobbyists and campaign contributions. Since 1995, the McAllen Economic
Development Corporation, along with other business groups, has paid lobbyist,
Randy Delay $380,000 for his work on the I-69 project. Randy Delay is the brother
of the powerful House majority whip, Tom Delay. In the last five years, the Chamber
of Commerce of Harlingen, a town just 35 miles down the road, has paid lobbyist
Ann Eppard $600,000. Eppard is a former aide to the powerful chairman of the House
Transportation Committee, Congressman Bud Shuster. When Shuster brought his committee
here for a field hearing in 1996, the Rio Grande Valley business community held
a fund raiser in his honor, bringing in an estimated $20,000. In a report earlier
this month, the House Ethics Committee said it was troubled that so many of Shuster
fund raisers, like the one in McAllen, were held in proximity to official trips.
Mike Allen says campaign contributions are simply what it takes to get things
done in Washington.
ALLEN: Some people, you know, they've asked, are you going
to be putting money into campaigns, and do you expect something? Absolutely, yeah,
we do expect something. We expect the rest of the country to take a look at Texas,
and especially the Mexican border, and give us our share of funds that really
should be put into an interstate. It's very sad that a very large Hispanic population
of the United States, the largest, has no interstate highway.
GERSH: Author, Jeff Birnbaum, has written extensively about
lobbying in campaign fund raising. Birnbaum says an interstate highway can mean
the difference between good and bad economic times. So a city like McAllen has
little choice but to become a sophisticated player in the system.
JEFFREY BIRNBAUM, AUTHOR, "THE MONEY MEN": It
is a scandal that interest - that have an interest in Washington, have to play
the Washington money game, and give so much money to so many interests, in order
to have any chance of getting their voices heard.
GERSH: But the business community here is taking no chances
in its bid for an interstate highway. Since 1995, board members of the McAllen
Economic Development Corporation have given more than $75,000 in campaign contributions.
Darren Gersh, NIGHTLY BUSINESS REPORT, McAllen, Texas.
Nightly Business Report transcripts are available on-line post broadcast.
The program is transcribed by FDCH. Updates may be posted at a later date. The
views of our guests and commentators are their own and do not necessarily represent
the views of Community Television Foundation of South Florida, Inc., Nightly Business
Report, or WPBT. Information presented on Nightly Business Report is not and should
not be considered as investment advice. © 2000 Community Television Foundation
of South Florida, Inc.
10/30/00: OfficeMax Going To The Max To Make Money
SUSIE GHARIB: The OfficeMax (OMX) chain is struggling with
growing pains. The 12-year-old superstore is trying to fine-tune the way it does
business, when many retailers are having a tough time. Diane Eastabrook looks
at OfficeMax and its founder, Michael Feuer's plans, for its future.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT:
Pens, paper, Post-It notes and portable files: Michael Feuer has sold millions
of them since he opened the first OfficeMax store 12 years ago.
MICHAEL FEUER, CHMN. & CEO, OFFICEMAX: The original
business plan called for 100 stores in five years. Fortunately, I was one lousy
planner, because now we have over 1,000 stores in 12 years.
EASTABROOK: Office supplies still account for the lion share
of OfficeMax' $5 billion in sales. But competition from rivals, like Staples (SPLS)
and Office Depot (ODP) has been so fierce, the company is trying to make money
in other ways, through its CopyMax centers, its e-tailing site, and soon, through
online classes for small businesses. OfficeMax is also changing the way it does
business. The company is revamping its distribution system, and is no longer selling
computers itself. Instead, OfficeMax has inked a deal with Gateway (GTW) allowing
it to set up small Gateway stores within OfficeMax stores.
FEUER: We have lost money in the computer business for the
past three years; last year losing $25 million. We have now eliminated all of
the computer departments in the United States, and we'll replace that loss with
a profit from the computer operation for the first time.
EASTABROOK: Analysts say, in the long run, all of the changes
OfficeMax has been making recently will benefit the company's overall performance
operations. But in the short run, the changes have been exceedingly painful. Implementing
these plans and a tough retailing environment stifled the company's sales and
earnings for the third quarter, and could impact the fourth quarter, too. As a
result, OfficeMax' stock has been shredded by investors. Analysts predict the
ride will continue to be rough.
JEFFREY STINSON, RETAIL ANALYST, MIDWEST RESEARCH: For people
that are taking kind of a near-term view, it's hard to really get any visibility
on upside catalysts within the story right now. And the reason I say that is,
we don't have a good feel on kind of what fourth-quarter numbers are going to
look like.
EASTABROOK: In Feuer's words, this has been a disastrous
year for OfficeMax. But the CEO is optimistic the bad times are behind the company
he founded.
FEUER: We've had the pain. We've endured the expense. And
now, it's time for the good times.
EASTABROOK: Diane Eastabrook, NIGHTLY BUSINESS REPORT, Mayfield
Heights, Ohio.
Nightly Business Report transcripts are available on-line post broadcast.
The program is transcribed by FDCH. Updates may be posted at a later date. The
views of our guests and commentators are their own and do not necessarily represent
the views of Community Television Foundation of South Florida, Inc., Nightly Business
Report, or WPBT. Information presented on Nightly Business Report is not and should
not be considered as investment advice. © 2000 Community Television Foundation
of South Florida, Inc.
10/30/00: Paul Kangas' Wall Street Wrap Up
The Lehman Brothers reduction in Cisco's (CSCO) target
price sent the stock down about $3 in early trading today, and dragged the tech-laden
NASDAQ market with it, as the Composite Index posted a 24.5-point loss by 10:30
a.m. But buyers sought refuge in many of the old-line blue chip stocks, like ALCOA
(AA), American Express (AXP) and DuPont (DD) which lifted the Dow Industrial Average
to a 137-point gain an hour into the session. The split between the old and new
economy sectors widened steadily throughout the rest of the morning, and well
into the afternoon, accentuated by a strong showing in the big paper stocks, like
International Paper (IP), Bowater (BOW) and Mead (MEA) which were upgraded to
"strong buys" by the Alex Brown brokerage. At 1:30 this afternoon then,
the Dow was up an impressive 164 points; the NASDAQ Index was down 102 points.
Old stalwart stocks continued to surge on some better-than-expected earnings from
companies like Pennzoil (PZL) and Union Carbide (UK). At the final bell, the Dow
Industrial Average was sporting a huge gain of 245.15 points, or 2.3 percent,
ending at 10,835.77. In today's 291-point trading range, the Dow closed 258 points
above its worst level of the day. That impressive blue chip performance helped
the NASDAQ Composite finally cut its loss to 86.96 points, putting it at 3191.40.
In its 130-point trading range, the Composite Index settled about 88 points below
its best level of the day, up 42 points from the low.
Big board volume moved up nicely to 1.16 billion shares
from Friday's slower pace. But no contest between up and down volume, about 3
1/2 times as much as the up variety than the low.
The Transport Index up 157 2/3 points.
Utilities had a big day, up almost 10 points, or 2.6 percent.
And the Closing Tick still fairly bullish at +486.
Standard & Poor's 500 up just over 19 points.
Over a 6.5-point rise in the 100.
The MidCap 400 up 3 2/3 points.
Bridge Futures Price Index fell 0.88.
New York Stock Exchange Composite up just over 13 1/2 points.
Little over a 5.25-point rise in the Value Line.
Russell2000 Small Cap up 2.87.
And the broadly-based Wilshire 5000 up just over 105 points,
or 0.8 percent.
The relatively strong September increases in personal incomes
and spending you heard about earlier, did not sit well with the bond market today,
as the figures suggested, a still brisk economy, susceptible to the pressures
of inflation. The debt market was also without the benefit of flight-to-quality
buying, given the strong rally in the blue chip stocks.
As a result, tax-free and corporate issues ended with little
change.
While the Treasury market closed modestly lower across the
board.
The 5-year notes dropping 4/32.
The 10-year notes down 5/32, with the yield at 5.74 percent.
30-year bond dropped 5/32.
And the Lehman Brothers Long-Term Treasury Bond Index was
down nearly 1 1/2 points.
Nortel Networks (NT) topped the active list on 36.1 million
shares, down $2.56. Stock traded as low as 39, and the Cisco news certainly didn't
help.
AT&T (T) edged up $0.69.
General Electric (GE) up $1.75, helping the Dow.
Lucent Technologies (LU) lost $0.94.
Wal*Mart (WMT) up a half a dollar. Fifth in volume.
Compaq Computer (CPQ) rose $0.40.
But Pharmacia (PHA) down $2 even. The company in with third-quarter
results, excluding merger and restructuring charges, $0.33 in earnings, up from
$0.21 last year. That's in-line with expectations.
EMC (EMC) fell $4.38 in the weak high-tech sector.
Pfizer (PFE) down $0.25.
And SBC Communications (SBC) doing well, up $1.81.
Here's the old-timer, ALCOA (AA) up $3.25, certainly helping
the Dow.
As did American Express (AXP) up $2.63.
Even the airlines participated in this rally.
Delta Air Lines (DAL) up $4.44.
DuPont (DD) up $2.69. The company is going to combine its
apparel and home textile businesses into one unit.
International Paper (IP) up $2.75. As I mentioned earlier,
Alex Brown upgraded it "market perform" to a "strong buy,"
along with a host of other paper companies.
And Verizon Communications (VZ) up $2.31. Third-quarter
earnings out today, $0.73 versus $0.72 pro forma last year. And the company's
predicting fourth-quarter earnings of $0.76 to $0.78 a share.
Syms (SYM) up $1.19, best percentage gainer. The company
can thank a positive article in this week's "Barron's" financial magazine
about the clothing store chain, noting that it has no debt, and the book value
of this stock is $7 a share, that's well above the market price, even after today's
big gain.
Pennzoil-Quaker State (PZL) up $1.63. Third-quarter earnings
$0.20, way up from last year's $0.07 and a penny above the Street estimate. Revenues
up 8.4 percent.
CVS (CVS), the big drugstore chain, up $6.19. Third-quarter
earnings 0.36, up from last year's 0.30, a penny above the Street estimates. Standard
& Poor's repeated a "strong buy."
And Union Carbide (UK) up $4.81. Third-quarter earnings
were down 62 percent from last year, at $0.22 a share. But that was still $0.02
above the company's own lowered projections which it made earlier this month.
Ryder System up $2.13. Wendy's International (WEN) has selected
Ryder to provide its third-party logistics for supplies.
Primedia (PRM), one of the few big losers, down $3.81. It's
going to acquire About.com (BOUT) for $690 million in stock. Potential dilution
there.
NASDAQ trading a loss of nearly 87 points and the Index
volume down from Friday, well down, 1.73 billion shares. About 17 stocks up for
every 21 down.
Cisco Systems (CSCO) topped the active list, off 2.63 on
that layman lowering of its one-year price target from 90 to the mid 60's.
Microsoft (MSFT) up $1.38. The company is negotiating with
News Corp (NWS) to invest a billion dollars in News Corp's Satellite TV unit.
Also, Microsoft co-founder, Paul Allen plans to resign from the board and to sell
15 million shares of the stock.
JDS Uniphase (JDSU) off nearly $6.
Juniper Networks (JNPR) dropping $14.63.
Sun Microsystems (SUNW) bucked the trend, up $0.81.
Intel (INTC) down $1.38.
SDL (SDLI) down $31.63.
And CIENA (CIEN) dropping $13.69.
Applied Micro Circuits (AMCC) down $13.25. The 2-for-1 split
stock should start trading tomorrow, incidentally.
And Amgen (AMGN) down $5.19 after falling over $9 Friday,
on the company's own lowered sales projection for two of its top products, namely
Epogen and Neupogen.
ImageX.com (IMGX) up $1.13. The company sees a smaller-than-expected
third-quarter loss of $0.55, the Street was looking for a loss of 0.92.
Globalstar Telecommunications (GSTRF) down 3.63. It reported
a third-quarter loss of $1, that was much larger |
