Tyco -- Lori (slow)
>> tyco’s new plan to split into three companies is being overshadowed by the latest reduction in its profit forecast. stock in the come glom rat plunged and ended down 3.19, a loss of 10579%. when tyco stock―a loss of 10.5%. the decline followed the company’s third downward earnings revision in the last four quarters. today’s cut put first quarter earnings at 38 cents versus earlier projections of 42 cents a share. the c.e.o. announced the company would be split apart. as for―reported, the congress glom rat announced the plans splits into three companies. analysts still like the breakup plan.
>> ultimately when this thing is broken up, the valuation is going to be predicated upon those operating fundamentals of those three separate businesses. and as we’ve seen and again as it relates to another earnings reduction or cut in the forecast today there clearly are charges being faced by most of those bises―businesses.
>> tyco said breen will run the largest of the three companies with $18 billion in revenue and 118,000 employees. it will include tyco’s fire protection, security and pump and valve businesses. tyco electronics, one of the world’s largest makers of electronic components, will start with revenues $12 billion annually and 88,000 employees. the third company will be tyco health care, the world’s second largest manufacturer of disposable medical products. its revenues for this year are nearly $10 billion and it has more than 40,000 employees. breen says the companies come a long way since 2002 when scandal surrounding now imprisoned former c.e.o. dennis kozlowski surfaced. still he said the company realizes that the quickest way to faster growth is to split up the company. the world’s biggest insurer may be close to a settlement with regulators. a.i.g. will pay more than $1 billion to settle charges by the new york attorney general and the s.e.c. the settlement, however, does not include former c.e.o. hank greenberg. a.i.g. and greenberg are accused using accounting tricks to dress up the results he maintains did he nothing wrong. it closed more than an 11.5% increase in today’s trading. philip bennett resigned today. the move came after a federal judge directed the bankrupt company to replace all of its board members. the u.s. bankruptcy judge had said he’d appoint a trustee to run the company should refco fail to replace its board members. bennett was fired as c.e.o. and arrested back in october after disclosing he hid $430 million worth of debt. time for a check of world and national news. president bush is warning iran against use being its nuclear program to blackmail the world. mark crumpton has more on this story.
>> at a joint press conference with german chancellor the president told reporters at the white house that he and the chancellor want iran referred to the u.n. security council for restarting its
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Listen Interview: Wachovia Securities---Sandler, Doug---Chief Equity Strategist
>> anytime you get towards the top end of a range like this, you’re going to be especially susceptible to any kind of fundamental news that comes out. certainly seeing three big misses by companies that people would classify as sort of early indicator companies, alcoa, phelps dodge and tyco, i think that puts people on alert. and generally if all you have is bad news and the good news hasn’t come out yet if there is good news to be told, you’re going to trade off that bad news. i think the market nide pullback. it looked for an excuse. it found one. doesn’t get us too worried. we haven’t changed any of what we set out to do.
>> how long or do you see dow 11,000 as a resistance level now?
>> it probably will be a temporary resistance level. we don’t watch the dow too much because you’re talking about 30 companies. subpoena is the better indicator. 1300 again is sort of that resistance level. we’ll ultimately breakthrough in our opinion. when you take some time sort of bouncing around near testimony
>> let me pick up with earnings again touching on financials. since they make up such a great portion of the s&p 500, how critical were the financial earnings next week?
>> i think financials are really sort of a dichotomy. you have two different sectors of financials. one is you have the banks. we can’t get that excited about banks. you have a declining net interest margin. that’s the kind of environment, you’re in an environment of flat yield curve. you’re going to see credit quality deteriorate which means you’re going to have to reserve more which takes more money out of profits. in the end, not a good environment for banks. on the other side of the coin, we have insurance companies, broker dealers, and asset managers. they’re in a very good environment. we like the insurance here. we like the broker dealers. and the asset managers. unfortunately the retail clients we regularly deal with, their financial money is all sort of concentrated in the banks. i think it’s a―that’s a concern because that’s not what we expect to outperform.
>> so forecast around 11%, 12%. where do you stand for the fourth quarter?
>> i don’t actually do the earnings forecasts for the s&p. i think we’re expecting sort of moderate growth for the year. somewhere around low double digits or high single digits for the year.
>> ok. so which companies or what industries might surprise to you the up or the downside?
>> well, they may not be surprises but i think technology clear sli our number one industry going into 2006. for lots of fundamental reasons and lots of technical reasons. but in the end techals is really what drives the timing for technology companies. but i’ll put it this way. fundamentally, corporations have a lot of cash on their balance sheet. as a result they’re going to spend. generally a big chunk goes to technology products and services. that’s good for tech companies. the technical perspective, all you need is a little confirmation. the tech stocks are going to go higher. everybody jumps on the bandwagon. we saw it at the end of 2006, beginning of 2006. it’s only going to continue so it can’s our number one group. other group we rate overweight is energy stocks. again, like financials, it’s very different than what would you normally look at when it comes to energy. we are not that excited about the big integrated oils. that’s what everybody owns. instead we feel very confident about the services and the drillers going forward. that’s where we think people make their money in energy. unfortunate that thely it’s not where the average retail invest juror positioned.
>> small cap stocks continue to be strong yet there’s a lot of focus in large cap―namely large cap growth stocks. is that a strategy pickup as well?
>> i like to stay away from the crowded train. there’s far too much focus on the large cap growth area. we do like growth. we don’t believe in the term value or growth. our focus as far as market scap what i would call small, large, large-mid. sort of in between the large and the mid space is what gets us excited. we clearly think the small cap stock group is rolled over. that generally happens later in the cycle. we’re starting to see―we’ve seen midst outperform. we think you’ll see the smaller large caps outperform. i am not very bullish on the big megacap stocks. i think that’s a losing game. nine times out of 10. the only time those stocks work --
>> got to jump in. sorry. we’re running out of time. back in a moment.
