Asbestos compensation bill
Interview: Wilbanks, Smith & Thomas---Wilbanks, Wayne---Chief Investment Officer
>> u.s. senate committee failed to agree on an asbestos compensation committee bill. shares of u.s. g fell as much as 15% on the day, the biggest u.s. maker waffle board, closing down 12.5%. shares of w r grace, the maker of chemicals and construction products dropped as much as 26%, down 19.6. owens, illinois, the biggest maker of glass containers in the u.s. climbed as much as 19%, ending the day down 16%. the asbestos compensation proposal would create a 108 billion trust fund to pay victims exposed to asbestos eand lawsuits that have bankrupted more than 60 u.s. companies. under the proposals insurers and manufacturers would contribute $90 billion to the fund. the rest coming from existing bankruptcy trusts and other investments. dianne feinstein of california said the bill will work in its present form.
>> i am very concerned that the trust fund a be unequipped to handle approximately 290,000 pending claims that will be channeled into this trust fund in its first years of operation.
>> feinstein and other committee members are proposing competing amendments on how to pay asbestos victims. orrin hatch will push for a final vote on the bill even if there is no agreement. our next guest is a garp investor, bullish on consumer, discretionary, energy and technology stocks , wayne wilbanks, chief investment officer at wilbanks, smith & thomas joining us from virginia beach, virginia. good to speak to you again. you own g.e. shares as many people in your position do. what do you expect for g.e.’s earnings ahead?
>> well, they are supposed to -- they’ve given out fairly good guidance in that 37 cent sort of range. we expect they’ll come in on target. we still see this as a second half this year, early 2004 story. the stock is very inexpensive relative to what we think the company will let the company do during the second half. we think the numbers tomorrow should be pretty good.
>> are you satisfied with the numbers that you’ve seen so far from g.e.? there have been those that have called some things into question concerning the way they’ve accounted for their many acquisitions over the years. do you have any concern about that at this point?
>> well, i think jeff immelt has done a great job of giving the street a lot more transparency. if you looked at the last couple of 10 q’s they’ve given out a lot more information. and i think as any large company you’ve got to continue to do your due diligence and ask the right questions. but i think a lot of the issues we’ve had with them maybe two years ago have really been cleaned up by the new management team. so we are comfortable with it.
>> what do you think of the chances that g.e. will surprise to the upside in a big way?
>> probably not. the tone that you got from the analysts meeting they had in early june kind of, i think, kept that $1.55 to $1.70 range. so they might reset guidance tomorrow at $1 $57 to $1.63, zeroing in on that $1.60 range. the real story is next year. think people need to realize 2004 is right around the corner. that’s when you see $1.75, maybe even $1.80 next year.
>> at this point you have g.e. up 15 3/4 percent year to date. what do you ix pekt to see for the rest of the year as far as g.e.’s stock price.
>> we have a price target of 35 and i think the stock can get there before the end of the year. it got to 31 3/4, backed up here to 28. even if the number is not perfect tomorrow, i think the stock has backed up enough that it can absorbed any sort of negative surprise. i think it’s just a function of people looking for yield as the year goes up. the stock pays almost 3%. that’s a phenomenal yield relative to a lot of the alternatives out there, especially from a aaa rated company. beyond g.e., let’s talk about other names atraffic -- attractive to you now.
>> recently we’ve been add tog the healthcare sector with names such as boston scientific, mckesson in the healthcare distribution business, we like royal dutch within the energy area, another one of these companies that’s putting up huge numbers right now. i just don’t think people believe oil can stay at $30 a barrel. if it does, think you are going to see a lot of these energy stocks move higher over the next six months.
>> where do you see oil going and what effect will that have on royal dutch at this point?
>> it’s interesting. a name like royal dutch stocks are 45, paying almost a 4% dividend just rted in excess of 50% earnings growth for the quarter. think the stock deserves to be at $55, not $45, especially with a p.e. of 14 times earnings. so this stock is way undervalued relative to where it should be. people think oil is going to drop to $25, and i don’t think it’s going there.
>> no rally today, but we have seen quite a rally since the beginning of the year. what have you sold into this rally?
>> only name we’ve sold recently is a company culled raytheon in the defense area. that was only to fund some of these new purchases in healthcare. we are fully invested at $97, $98%. we think you’ll have a correction in july, but don’t let the day-to-day stuff fool you. there is a tremendous amount of liquidity backing this market up. as soon as you get through 9300, 9400, there will be a horde of money that wants to get back in.
>> wayne wilbanks, chief investment officer at wilbanks, smith & thomas. today’s economic data suggests u.s. companies are still slashing payrolls to cut costs heading into the last half of the year. we’ll have a complete update on the economic news when we return.
