Interview: Jeff Everett---Templeton World Fund
>> jeff everett joins us now. he manages the templeton world fund and the templeton foreign fund with combined assets of almost $30 billion. he is coming to us from san mateo, california this morn. jeff, thank you very much for being with us. let’s start off talking about the most recent action that we have seen in the stock market . the selloff that we have seen in the last couple of days. what do you make of that?
>> well, i think it’s a healthy period for investors to reassess exactly what risks they own in portfolios and in their investments. and to take a fresh look at opportunities that may have become cheaper as a result of this action.
>> some traders say you are seeing a sell off of any risk and people got much more nervous about holding the more risky investments. did you think that’s true?
>> that appears to be exactly the case. and again, i think investors learned a lot from a period five years ago which was very difficult, so they will reassess their risk levels and tolerance and move forward. there are very good signs out there. at the same time, it had been a while since we had seen volatility and significantly down day.
>> what are you finding that’s attractive given the market action of late?
>> well, over the past many months we had been finding opportunities in sectors that were too cheap. we used a five-year time horizon at templeton and if you go back five year, what was cold back then is very hot. investors looking for hard assets, commodities, utilities, yields, energy, and that was all very cold back in 1999, 2000, and is now very hot. what was hot back then is actually very cold right now. one of the biggest overweights is media. and very happily those stocks have prmpled performed very well. investors are realizing the cash flows and earnings that the companies are generating are real, visible, and growing nicely.
>> what about financials? what do you think of that area? >> i think you have to be choosy. i think there are some very troubling things going on in some of the regional bank. there’s a tug of war between the security people, the o.c.c. and the fed and the accounting people. and that has led to a drop in provisions which is very disturbing in some u.s. banks.
>> do you avoid that, for example, as some of your top holdings include merrill lynch and j.p. morgan.
>> not regional banks, but the financial services have good global businesses. again, primarily global at templeton. they have tremendous long-term futures and are not expensive stocks.
>> news corp. is among the media companies that are in your top 10 holdings. tell us about them. news corp. and directv and bskyb very undervalued and great cash flow and rupert murdoch seems to be doing well and it was an overlooked stock that investors seem to be coming back to.
>> are pharmaceuticals also overlooked?
>> pharmaceuticals have been overlooked as well. again, you have to be picky.
>> they offer good dividends to wait for investors to come back to realizing the power of the cash flows.
>> want to mention you have glaxosmithkline as the top 10 holdings in that area. and anyone else that you think is attractive in that group?
>> well, it starts with glaxo and sanofi in france. there are some japanese names as well. they have performed well in the selloff and in our view, investors are really trying to reassess where the risks are and where they’re not. i believe that some of these pharmaceuticals are being born out as fairly safe, but very strong financially with great prospects as stock.
>> globally, assess the outlook for us and where you think are the most attractive areas for investing.
>> we don’t come to the table with preconceived notions. we are looking for any area or industry undervalued and finding opportunities in a broad place around the world. new ideas still in asia and you’re finding increased profitability in europe and companies right in ore our own backyard and for the first time in many year, america has lagged the world markets substantially and not surprisingly finding a fair number of opportunities in our own backyard. some large cap u.s. names and many investors would be wise to look at that area.
>> all right. thank you very much, jeff. we appreciate your time today.
>> thank you very much.
>> jeff everett is the chief investment officer of the templeton global equity group. when we come back, live to capitol hill where president bush’s choice for c.i.a. director is in the hot seat today. our awe merck is making a big push for the cervical cancer vaccine. the company makes its case today in front of u.s. regulators in maryland. it hopes to convince them that vaccine should be given to children as well as adults. they are pushing for universal immunization with the vaccine as early as age nine. it would be the first to prevent papilloma virus. president bush’s choice for c.i.a. director is being grilled on capitol hill this morning. michelle makori has the latest world and national news.
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Listen On the markets--Suzy (fast)
NYSE --- Julie (slow)
Nasdaq --- Robert Gray (slow)
NYMEX --- Su (fast)
>> good morning. if you are just joining us, i’m suzy assaad and this is “ on the markets .” the leading economic index dropped last month, but the drop that was in march was changed to a gain. sears posted a better than expected profit, cut their costs and that made a big difference for the retailer. and burger king made the public trading debut this morning. it raised $425 million in an i.p.o. pricing at $17 a share. as for the overall averages a little bit of a bounce back after the heavy selling we saw in yesterday’s session. the dow is up just under .25% as is the s&p. the nasdaq is up about -- [inaudible] • year to date. a big move going on in the treasuries and pushing the yields down to a.9% if two-year note is at 4.93. as for the suburban si markets , a movement there―as for the currency market , secretary snow reiterated the strong dollar policy on u.s. interest rate and said that this administration is committed to cutting the budget deficit to 1.4% of g.d.p. by 2009. that, as you’re seeing is causing the dollar to decline across the board today. the euro is up .3% and the british pound is higher by .33. gold is little changed while viller is is declining. we want to check in with the market reporters and the rally we are seeing today. julie hyman at the nyse. robert gray is at the nasdaq. julie?
>> hi. thanks, suzy. i am looking at the most actively traded stock on the new york stock exchange today is a stock that is participating in the rally. it is the stock’s first day. i am talking about burger king and we have been talking about the stock and those shares are trading higher between two and three percent. earlier when they opened up, they rose as much as 6.5%. they have come down considerably from levels. still seing a lot of buying in that stock. overall t company sold about $425 million worth of shares to the public. that happened last night. they were sold at $17 each and now trading today around $17.50 at this point in time. now, why has this particular i.p.o. gotten so much interest? well, partially because we have had some other high-profile fast food i.p.o.’s this year thus far. let’s look at how they are trading. chipotle mexican grill and tim hortons. and they have soar since the i.p.o. and became public in january. since then up 185%. tim hortons hasn’t fared as well, but still up about 16% since the initial public offering in march. when we talk about the i.p.o.’s, however, i don’t want to forget one fast food-related doughnut i.p.o., krispy kreme, which have recovered this year nicely up 90%, but down 40% since that i.p.o. now over to robert at the nasdaq.
>> julie, thanks. we are seing a rally here at nasdaq. we wanted to take a closer look after the seven-day decline t longest for the composite since 2001. investigators saying the selloff, of course, a little overdone relative to earnings outlook. traders did expect it to bounce back including brad wolack saying oversold market on some measures including the relative strength index and you can see the nasdaq when it falls down below the green line there, the 30 level, traders generally expect a bounce back in the market . and at least some firming in the market . we have seen the return of volatility here if you look at the vixen that tracks the nasdaq 100, it is down a little bit today, but yesterday touching the highest level in more than a year. investors expecting that to continue along with a decline. according to news writer who points to interest rates were too low for too long and also talks about margin. margin call cans kill the bid. he is expectsing to see more of that. and if you look at the new york stock exchange margin, and the most recent data out last night. the april 2006 margin debt hat $241 billion. it peaked back in march of 2000 at $279 billion. that may ring a bell as well, of course w the market peaking back at that point in time. the nasdaq, by the way, does not publish margin debt data. belkin pointing to prime brokers and hedge funds as being over funded. he is advising investors to sell and rally. about an hour ago, we had someone on who was talking about not expecting a strong bounce back today and in the near term, either. he would rather see the market consolidate and digest the decline before taking off. andy brooks also telling me this on why the nasdaq was hit hardest. it is where the froth is, more small cap tech names and trader types going after them. you have to realize there’s always excess and maybe we had that and there’s always a correction. back to you.
>> thank you. we have crude that is declined to five-week lou lows and traders are less worried about gas splice after yesterday’s report that showed inventories jutched for a third―jumped for a third time in a row. crude is trading at $68 obthe session. we send you to su keenan at the new york mercantile exchange.
>> the natural gas number put trade into a high gear. a build of 4.1% was an ‘tis anticipated. take a look at natural gas because not only have we been down as much as 3.5%, but we broke below the $6 mark. we have a five handle on the price of natural gas. $5.93 for b.t.u.’s. and you have to realize you have to go back to may of last year for the last time we were at the $6 mark. february of last year we broke below and mid december we were at more than $15. a record price for natural gas because of concerns about the hurricane. those concerns now gone because • those concerns about shortages gone now. take a look at oil. oil has been holding steady. $69 has been a support level. we have broke below $68 on that natural gas news. we have now come back above $68. but this technical factor if this holds will be a theme throughout the day.
>> thank you very much, su keenan. we take a break. when we come back, we will take a look at what’s going on in the stock market . we have templeton global group’s jeff everett who receives two funds with $30 billion in that.
