Nasdaq---Anthony (fast)
Alcoa
Interview: Dana Investment Advisory---Friedman, Ben---Portfolio Manager
>> a u.s. district judge in houston today said he’ll accept former enron assistant treasurer lea fastow guilty of one plea to one count of filing a false tax return. the agreement came on terms that the judge could impose a stiffer penalty if he sees fit. he’s considering centering a presentencing investigation of fastow to delay her sentencing by 50 to 70 day, setting the stage for former chief financial officer, andrew fastow, her husband, as he is working on a deal with prosecutors to plead guilty for his role in the enron accounting scandal. volume was, again, strong on the nasdaq, hitting its heaviest level in seven months and we’ll go to times square for the latest on the technology-heavy nasdaq and anthony massucci.
>> with that heavy volume, the nasdaq up to 2100 on the close today. moving up 1%. the move has been 100 points this week alone. for the year, adding one day from last week, you have a whole year, a week and a day, the nasdaq up 5% for the year, up 50% last year and another 5% in 2004 and already better the performance of the s&p and dow in 2004. today, the nasdaq was led higher by telecom stocks . the networking group was up strong. ericsson, qualcomm, those two telecom names jumping today. wireless semiconductor stocks , networking stocks here, r.f. micro, triquint semiconductor also trading higher. semiconductors like altera, broadcom, xilinx, strong move for the semis, as well. across the board the move was strong for technology shares. retail stocks on the move, as well, as retail sales coming in for the fourth quarter. american eagle outfitters traded higher as the company said they’re comfortable with current-quarter earnings estimates. wet seal expects a wider fourth-quarter loss and sales were falling and that stock hit today. restoration hardware down in double digits expecting a lower fourth-quarter profit. sun micro continues on its tear up 10% today well above $5 a share at this point. bank of america saying they think the price goes to $6.25 over the next 12 months for sun micro. they said as tech spending improves, so will sun’s stock price. they said the march quarter will impress based on early checks by partly bank of america and they like the new partnership with advanced micro devices. finally, apple computer up as hewlett-packard will carry apple’s itunes software on its hardware. the nasdaq at a high for the year, up 1%.
>> alcoa’s earnings just posted and the profits more than doubled year-on-year. our next guest says the large increase is because the world’s largest aluminum maker is cutting costs and also because of strong demand for aluminum and a return to so-called value stocks leading the market. ben friedman, senior portfolio manager with dana investment advisory, joins us now from dallas. you’re pleased with the results but the market, at least in extended hours, is yawning. the stock has done nothing since the numbers came out. what’s the problem?
>> i’m very pleased with the earnings. consensus was about 34 cents a share. i thought they could beat that given some of their comments they talked about at the end of the third quarter. it came in actually beat by a nickel 39 cents, over 50% gain from a year ago. so the results overall to me are happy. i think the after-hours market may be that the sales numbers, though, beat expectations, barely beat expectations so i think that there wasn’t as big of a jump in sales as we saw in the net income number.
>> but given the 100% increase over the past eight or nine months, you’re expecting it will continue regardless of this one or two hours of reaction to the numbers?
>> you’re talking about the stock price, right?
>> yes.
>> increasing―yes, i think alcoa has a couple of things going for it. one, the aluminum industry overall is basically we saw its trough in 2002. the supply-demand characteristics, in 2002, we saw probably the biggest glut in supply that we’ve ever seen in aluminum. 2003, that’s basically cut in half. 2004 should continue to improve. on the demand side, we’re seeing increased demand from its downstream operations, specifically in the u.s. and great britain and then more importantly from the upstream, the alumna, the raw material for aluminum, in the chinese market. couple that with alcoa’s significant cost restructuring programs. we’re just now see the benefits in the third quarter and this quarter and it’s the perfect time at least what we saw in the third quarter when we started getting into the stock and continuing to now.
>> your firm is a value firm and this stock is up 100% and its p.e.’s are 39 times this year’s earnings.% this is no longer inexpensive for a value firm.
>> i agree. but the way you look at it is we look at it on a forward basis. on a forward basis earnings, the stock is trading 21 times. that is, in fact, higher than the market as a whole trading at 18 times. one thing to consider is that alcoa’s earnings as we saw in the fourth quarter, expected to grow 50% this year in 2004 where the market’s somewhere in the 12% to 15% range. but the way we define relate, a relative value, looking within the materials sector.
>> i apologize because we’re running out of time. thank you for joining us. senior portfolio manager from dana investment in dallas. stick around, we’re looking at music piracy next.
