Nasdaq---Julie (slow)
High yield bonds
Interview: Value Line Asset Mgmt.---Brooks, Brad---Fund Manager
>> the nasdaq had a volatile trading session, much like the other indexes, but it did finish the day slightly higher, unlike the dow and the s&p. for a look at the trade, we go to julie hyman at the marketsite.
>> the first day of 2004 is an up day for the nasdaq, but really just barely. to take a look at the trading day as’ whole we saw the nasdaq trading stronger earlier in the kay after the manufacturing data up as much as .8%, falling back as the day went on, banking stocks taking a hit and as a result drawing the nasdaq down as a whole. the banking index within the nasdaq down .4%. we were seeing bonds falling, the yields rising, and that really hurting bank stocks . the index as a whole finished the day up .2% just eeking out a little bit of a gain. on the week, we did see a rise in the index as well, up 1.7%, the fourth straight week that the nasdaq has risen and in terms of group movers on the nasdaq for the week the telecommunications group was the leading group, helping to fuel some of those gains that we saw in the index as a whole. telecomstocks in particular that we saw moving were gaining on wednesday and then extended the gains once again in today’s session, talking specifically about ciena, sycamore and juniper networks, all gaining because they won a contract from the defense department to revamp its communication system worldwide. this was worth $260 million over two years. eventually, the defense department will award $850 million total in contracts. both sycamore and ciena not saying how much it’s worth to them, one analyst saying it could be worth $50 million to juniper alone. cyfragen biosystems dropping after the company’s fourth quarter sales missed its own estimates. back to you in the studio.
>> julie hyman at the nasdaq. by the end of 2003 both high yield bonds and the regular market ended up about 28%. brad brooks, who helps manage about $4 billion in assets at value line securities says high-yield bonds can offer investors comparable returns at a lot less risk. joining us to discuss his outlook for 2004, welcome, i believe it was last february you were in, you were talking about the attributes then and it’s followed through. now, we find ourselves in a new year and you expect to see more of the same?
>> i wouldn’t say more of the same, but i think hopefully it will be another good year at least for high yield. this past year was a record year for the last 10 years so i’m not looking for midor high 20s again, -- mid or high 20’s but single to high digits in the year ahead.
>> what are you seeing as a potential trend this year that could lead people to the right high yield? as we know, some is high yield, some is junk.
>> in my portfolio i have been making it more defensive given the low rates in case rates do back up on the treasury side to give more protection there. what i like about as an asset class is the defensive nature of it. you get a very good percentage, 70-80% of what stocks provide with a lot less downside risk.
>> let’s talk about some of the things you like. keeping an eye on chevron texaco.
>> the stock i own in the balance that i manage, it’s a fairly stable company, obviously, good valuations, earnings growth has been spectacular this past year. what i like about going the year forward is actually, oil may be stable at these levels, a lot of people looking for it to draw drastically so i think a fair amount of bad news is built in, so i think there could be good news. the past month has been very strong for the stock .
>> keeping an eye on thomas & betts. hit a 52-week high again.
>> it’s something i have in both my portfolios, i own the bonds in both my portfolios and the stock . it’s more of a cyclical turnaround play. they make electronic components. i think what’s driven it up the last couple of months is they have a small unit that delivers steel. the long-term play is the upgrading of the electrical grid in this country and europe.
>> they make circuit breakers and other systems for --
>> it’s mostly for industrial purposes, but i think given the problems we have had in the last six months here and in europe you may see more low growth in that sector, and it’s also similar with chevron, you have a little play on the dollar weakness, which i also like.
>> are you expecting to see the dollar weakness continue? and if so, by how much? and how does that change your investment strategy as you look at the way the market has moved?
>> i think you could see in the year ahead another 5-10% against the euro. that’s not a one-way path, though, so across other currencies, there may be continued weakness there too. i have been trying to skew my portfolios more toward companies with a fair amount of sales in europe to take advantage of that, because usually there is a lag.
>> get the opportunity for the greater profits on the similar sales change. similar sales situation. do you think it’s more of a short-term situation?
>> no, i think you may see more of those―there tends to be a log between when the currency changes and when the sales change. sometimes, it can be up to a year, so i still think you may see some of these benefits in the year ahead.
>> brad brooks is portfolio manager at value line securities. coming up parmalat’s two chief financial officers talked to investigators today.
