Health care shares
Interview:Credit Suisse Asset Mgmt.---Wiegand, Eric---Equity Strategist
>> welcome back. the f.c.c. has been questioning general mills employees in a practice known as trade loading. that’s according to a lawyer for a fired general mills employee. trade loading means a company shifts excess orders to inflate sales and boost share price. the lawyer says the excess shipment’s accelerated in 2003 because general mills stock price determined its final payment for the purchase of pillsbury from diagio. on tuesday general mills said s.e.c. staff recommended action against the company for sales and accounting practices. a spokesman declined to comment on the allegations. also today, or i should say changing gears now, health care, industrials and consumer discretionary stocks are the areas our next guest favors. he’s going to tell us which stocks he’s buy, i hope. eric is the director of a private client group at credit suisse and joins me now in the studio. let’s talk about this. you like health care. we just reported health care and consumer staples among the best performing groups over the past five days. there seems to be―this market has a smell to it that it’s getting more defensive. a lot of people saying they’re liking health care again.
>> absolutely. i think the principle attraction to health care process, it had been lagging did not participate in the significant market rally that we had seen last year. with some notable exceptions. but by and large valuations compelling, see something improved product profiles. giving us a little more encouragement that that’s an area that we should focus our efforts. but also like those sectors that are certainly more influenced by the health of the economy. consumer sickly calls as one point and also the industrial area where we do think that we’re going to continue to see improvement, all it be not lynnier improvement in the economy. so let’s talk about the economy. because, of course, today’s date is going to be dominated as it has been so much this week. it seems by the economy and the fed. your take on the jobs data. it was a mifplgd number in the eyes of many people. we saw stocks and bonds rise on the news.
>> i think you’re absolutely right as far as a little something for everybody. it demonstrated growth and improvement. both with the lowering of the unemployment rates. so the household survey demonstrating that jobs are being added. but the payroll survey also showing improvement. albeit not so robust that it would really worry the bond market, the fixed income markets. so the longer that investors both bond and equity investors can get accustomed to the fed being able to take a more moderate approach, i think the more likely we are to have multiples stay at current levels or perhaps even work modestly higher.
>> we also had consumer credit numbers come out today. it hit a record. we could look at the month to month increases. but for 25 straight years that number has gone up and unand up. we have reached $2 trillion of consumer credit. do you think it’s going to be something that’s going to be at killies heel of this economy or keeping the fed from raising rates?
>> certainly from a sector standpoint our emphasis on the more industrial side of the economy suggests that we believe that there’s a need to pass the baton from a consumer-driven economy to a corporate spending environment. i do think that we’re seeing that being demonstrated. but it does suggest that the absolute rate of growth in consumer spending is likely to moderate. i certainly don’t believe that we’re likely to see a significant retrenchment consumption of the part of the individuals in the u.s. but the rate of those gains i think does have to moderate. importantly, we have to consider wage growth as well as the wealth impact in your piece did you indicate that the growth in the s&p, we also saw real estate values go up, which is certainly a significant component of wealth as far as individuals and house lleds concerned. no.
>> question. i just would point out that the consumer debt level that came out today does not include mortgage debt. totally separate. mortgages have been declining as well, those numbers, applications are way down. let me ask you, why a stock now, a.d.p., automatic data process? what about a.d.p.? why now?
>> why now? because of its sensitivity to economic improvement. their principle businesses would be payroll processing, securities processing, informational packets for securities businesses. and we are generally seeing an improvment. volumes and equity markets have picked up over the last 12 months. you’re seeing some job creation. we could talk about how robust it is or not. but directly these are pointing to improvement in their corps -- some of the corps triggers that would give leverage to earnings improvement for the company. and the likelihood that interest rates rise would also be a beneficiary for a.d.p.’s prospects. 25 times their fiscal earnings for 2005. they’re on a june fiscal year. doesn’t have it screaming as remarkably cheap, but we think those estimates will likely prove to be conservative.
>> thank you. appreciate your time. have a great weekend. that is, of course, eric, the director of private client group at credit suisse asset management. still to come, manufacturing data suggested the u.s. economy was expanding. though the job numbers came in slower than expected. we’ll explain.
