Large cap growth stocks
Wilbanks, Smith & Thomas---Wilbanks, Wayne---Chief Investment Officer
>> wall street pay is headed back to what was seen at the height of the bull market . investment bankers will receive an average raise of 22% this year. students graduating this year are getting signing bonuses of -$45,000. the biggest increases are coming% at the top, surprise, surprise. pay for managing directors will rise about 39% this year and will return to $1 million a year, a sign of the rebound in the securities industry after a slump that led to the elimination of 125,000 jobs from% -around the world. fees for investment banking worldwide this year may rise 19% to over $47 billion, according to one consultant. our next guest says he invests in large cap growth stocks and likes consumer discretionary, industrials and energy stocks. he is wayne wilbanks, chief investment officer at wilbanks, smith & thomas and joins us live from virginia. before we get to stocks like microsoft and consumer discretionary and other groups you like, what is going on overall in the market this year? can we continue to see positive, solid economic news and stocks moving lower?
>> the last couple of times i’ve been on we’ve been talking about how the market , after going 300 days up through january had to correct itself and it didn’t matter if it’s madrid or iraq or rising oil, you simply spent the last three months digesting that huge move we had. we think we’re just about at the end of that and we actually go the got some buy signals early this week and we’re starting to put money back in. we’re telling people not to be caught up with the headlines because underneath the surface, the economy is so strong and liquidity so huge that that can almost overpower just about any fundamental.
>> it seems like for years we talked about the jobless recovery and now we’re getting strong job data―the initial weekly jobless claims below 400,000 for quite a while and unemployment coming down and the jobs number in general, the service jobs sector hiring again. and yet we continue to see stocks moving down. i want to ask if that’s why you like consumer discretionary stocks, because of the trend in employment.
>> you’ll see improved employment better than most economists predicted. pretty much the way we see it is that anybody looking for a job right now historically can find a job. those who have their jobs,, it appears to us, have continued good confidence in seeing holding those jobs and we’re seeing pay raises accelerating. i think the job picture is much better than what perhaps the headlines would tell you and plus in the consumer discretionary space you have a lot of companies cranking out huge numbers.
>> who do you like?
>> names such as viacom, home depot, comcast. all of these companies are big, world-class leaders and they’re all show amazing numbers. you saw that in home depot’s numbers early this week, knocking the ball out of the park and raising guidance and that’s happening with a lot of the companies.
>> we’ve talked about the price of energy much of this week with crude oil over $41 a barrel. you like energy stocks. is the price of oil why?
>> it’s more to do with the analysts on wall street have underestimated the price of oil and you’ve noticed that from the large integrated to the independents, all the earnings estimates were way off the mark and they’re all having to raise their numbers. the earnings comparisons all of a sudden look a lot better and earnings are coming in way better than anyone anticipated we don’t see oil returning to $25 a barrel and we think people need to be used to $2-a-gallon gasoline and we think over the next three or four years you’ll have $40 to $50 a barrel permanent prices.
>> is the best way to play oil prices the integrated oil stocks or the drillers?
>> the best place to have been so far is ones getting acquired, the smaller independent players―tom brown. that’s what you’re seeing the large integrateds do with the cash flow is buying the independents because they don’t want to drill anymore.
>> what do you own?
>> a combination of some of the large drillers like schlumberger schlumberger, and own the large integrated because we’re a large cap manager. in the midcap we own chesapeake energy and some of the midcap-type names. so we own a little bit of everything because the rising boat―rising tide lifts all boats.
>> microsoft, why do you like that?
>> something has to give here. they just beat their earnings numbers and the stock at $25 and hasn’t moved so either the stock has to go to $32 because they’re going to have to give some of that money back to shareholders, one way or the other, bigger dividends or you’ll start to see unrest among shareholders so almost no downside risk and $5 to $7 on the upside.
>> when analyzing the markets , some are concerned iraq is bringing down stock prices with fear of tensions abroad. do you share that?
>> it’s good for headline risk but i would argue that with what we’ve seen between madrid, 3-11 and the iraq situation, for the market to be only down 6% for the s&p 500 underlines account fact―underlines the fact that especially once that news gets off the front page―by october or november―iraq may not be the front center story and then people will focus on how good the economy is around the globe.
>> our thanks and wish you a good weekend, wayne wilbanks with wilbanks, smith & thomas.
