Good news for employment
Interview: Collins & Co.---Raabe, Bruce---Chief Investment Officer
>> an update on mark swartz, former chief executive of tyco. the $12k.5 million bonus he got in 1999 he says. boies testified against swartz and dennis kozlowski. they’re on trial in manhattan state report. boies said he confronted him about the bonus saying it was not approved by the board or disclosed to investors or reported on his income taxes. this is part of the money they stole from the company. testimony ended this afternoon. the jury is dismissed until next week when closing arguments begin. stocks got a lift today when the institute for supply management reported that manufacturing held near a two-year high in february. our next guest says today’s i.s. may bode well for friday’s employment stkata and the equity market .chief investment officer at collins & company joins us from our san francisco bureau. let me ask you first, why is this such good news for employment and if it does come in as you suspect on friday, what that will mean for equities
>> i think the market looked closely at the i.s.m. number. though manufacturing makes up only 1/7 of the economy, inside that number is an indication for employment for manufacturing. that seems to have possibly turned the corner. from our perspective, it seems the one missing link in the confidence that the economy has turned around is unemployment. we’re hoping and i think the market reacted today to the potential that impact employment is starting to increase and we’ll see positive numbers regarding unemployment at end of the week.
>> if it does do that, why does the market go up significantly or does it because this has been something people were waiting for for quite some time, hasn’t strong economic performance been priced in yet?
>> partly i think, you know, we have had the economy seeming to recover and then falling back. i think this time hopefully it will pan out that, in fact, this is a true recovery, it’s sustainable. we all believe i think to have a sustainable recovery we need to have unemployment creep down a bit. this i.s.m. number is a glimmer of hope that we’ll see that this month, next month and throughout the following quarter that unemployment will come down and thosed a jobs will add more to the economy and we’ll see sustained growth throughout the year.
>> few think we can get more out of the markets come friday if we get a good report, you must think we’re not overvalued at this point.
>> i think to some degree that is true. many charts look a little topy. we have had a huge move in the dow over the last six months and nasdaq. i think investors, if they’re savvy and look at specific stocks and specific opportunities, there’s plenty of opportunity to invest your money in companies that have relatively attractive valuations with solid prospects going forward. i think it’s a stock picker’s market .
>> you’re a stock picker, where do we go, where should investors look?
>> a couple of stocks we like today. coopers. they’re a speciality manufacturer of contact lenses. growing faster than the industry. twice the margin of competitor bausch & lomb. this is a company―a varied company that has done exceptionally well over the last five years. over the last six months, the stock has moved quite nicely. nonetheless, we see 20% earnings growth. they announce earnings this afternoon. we expect 52 cents on the quarter. 18 to 19 tpaoeupls this year’s earnings, we see the company quite attractive on valuation and long-term perspective.
>> i aou said you had a second one.
>> starcom provides low-cost telecommunications equipment, primarily in china. they’re wireless and wire line services provide entry level cell service for developing countries. they are expanding aggressively in china and moving in to india and vietnam. those will be good growth stories for them this year. we see their products as quite attractive from a cost perspective. they’re inexpensive to implement and have attractive margins. they announced a partnership with cisco to expand products further. at approximately 17 to 18 times this year’s earnings, growing at approximately 20%, we see a real value in the story behind the company. having a strengthening economy to add additional fire to coopers and utstarcom, we see those as good choices for investors today.
>> less than a minute. you have a super tuesday primary out there tomorrow as do people in new york. how do you see the election affecting stocks? does it matter whether it is john kerry or whether it’s george w. bush in the end?
>> well, i think the economy -- what most investors will key off of is certainly there are political perspectives from the two potential presidents. how that plays out will be reflected later on as we get indications of how that election will turn out. i think tomorrow is probably not the story for the market as far as the election in november. certainly election year has always been in general a good year for the market looking forward.%
>> going to have to leave it there. chief investment officer at collins & company. 10 states are holding contests tomorrow. we’ll talk about that, next.
