Pricey in this market
Mesirow Financial---Rosenblum, Jennifer---Portfolio Manager
>> shares of tech data are rising in after-hours’ trading,% -up nearly $2. quarterly income rose 61%. customers spent more to replace outdated computers and software. tech data is the second largest distributor of computers and related parts and earned 59 cents a share in the quarter ending in april. sales were up 23% year on year and part of that increase comes from europe. a couple of retailers reported better-than-expected results after the close of business today. dollar tree stores, shares rising in extended trade. now unchanged. net income, 31 cents a share, two cents more than expectations. dollar tree credits better control over its inventory and fewer mark-downs. meanwhile, michael’s stores says its first-quarter earnings were 42 cents a share. the arts and crafts retailer says its operating profit margin rose to a record as it was able to control inventory. two times in a row, the i word. michael’s stores says second-quarter earnings will be as much as 40 cents a share and analysts were looking for 37 cents a share. the shares down almost 2% today in regular trade. our next guest invests in large cap stocks and says even though interest rates are expected to rise, she’s not selling all of her financial stocks. jennifer rosenblum, portfolio manager with mesirow financial asset management joining us from chicago. we earlier said, jennifer, that you were having a hard time picking stocks that you like. do you think things are really that pricey in this market although we’ve seen the decline, except for the last day or so?
>> yes, i do think. i think the market ‘s become quite expensive. in the second quarter and first quarter of last year, we were able to find a lot of stocks. most were in financials and healthcare. but this year we’ve had a very tough time finding attractive valuations. we’ve only added two new stocks to our portfolios year to date, which is a small amount.
>> so with the s&p at, say, 1115 ph.d., you’re a large cap investor, what would you expect for a return on a large cap portfolio for the balance of the year?
>> our hope is that―i think the market still has a little bit on the downside to go but i think it should come back and towards the end of the year when the election heats up, i think the market will tend to do better and we’re hoping for somewhat of an average or a little bit below-average year so maybe 9%, 10% hopefully.
>> as a professional investor, you mentioned the election. do you have a strategy in place depending on who wins?
>> not really. we’re bottoms-up investors and look for good companies with good long-term returns. our hope is that we can hold a stock three to five years. we really try not to time on certain issues and events happening. it usually seems to work against you and that’s what we don’t want to happen so we don’t have a strategy in place depending upon who wins the election.
>> not a day goes by that we don’t talk about oil. you are backing away from energy holdings right now. do you think we’ve seen the high water mark or close to it for oil and energy stocks?
>> i think we’re close to it. the valuations are all of―the way we look at stocks, the valuations have been trending lower and lower on all the energy companies. that’s why we’ve sold the majority―all of our energy holdings. this is a real peak cycle and we think that the market is giving% -too much value to these stocks right now so that’s why we’ve decided to get away from them right now because no matter what happens to oil prices, it still is a commodity and at some point the market will return to that realization.
>> this is interesting and the notes our producer put together says one of the companies you like is m.g.i. investment, the mortgage insurance giant because you call it an anti-financial company. maybe you can explain what that means.
>> right. we called it anti-financial because we feel it acts differently than other financial companies when interest rates are turbulent as they are now. because they insure mortgages, what happened in the refinancing boom of the last year and a half is that when people refinanced at such lower rates, they were sometimes able to get rid of their mortgage insurance and didn’t have to pay the premiums anymore which hurt mgic. right now with the refinancing boom all but ended and interest rates going up, their persistency levels are higher and it’s good for them when interest rates go higher so when we say anti-financial, that means acting differently than most financial stocks during a rising interest rate environment.
>> so you’re holding on to financials in general despite the probability that interest rates will rise?
>> yes. because of our bottoms-up strat gee, we don’t want to get in and out of stocks because of what we believe interest rates are doing.
>> jennifer rosenblum, thank you very much for joining us, portfolio manager with mesirow financial investment management% -in chicago. we’ll head to washington for a wrap-up of today’s economic reports, including the unexpected drop in new home sales, the biggest one-month drop since 1994.
