Nasdaq---Anthony (slow)
Contrarian fund
Interview: RS Investments---Pilara, Andrew---Portfolio Manager
>> welcome back. anthony massucci tells us about the latest headlines coming from oracle.
>> in the latest news on oracle is that the u.s. department of justice is seek additional information on whether to block oracle’s 6.3 billion hostile bid for rival software maker peoplesoft. now, on the bloomberg terminal the latest news we have is that the u.s. had to decide by friday whether to continue the investigation into oracle’s bid. a spokes woman with the justice department said that the investigation is continuing, so obviously that’s spilling over into today which is monday. so that stock wreally down for the day but up for the quarter. in fact, with oracle’s 12% rally in the second quarter, let me give you some other top performers we saw in the second quarter. a few doubled over the time, like broadcom. this company gained about 14u7b%. its second quarter sales could set a record for the company, and it’s benefitting as more people surf the web using wireless computers. now, another stock that nearly doubled, icos corporation, going up on hopes that its impotence drug will be on the market in the second half of the year. that helped those shares. monster worldwide, 96% was the rally for this company, a smaller loss in the quarter, the spinoff of an executive search unit really helped drive this stock higher for the second quarter. millennium pharmaceuticals and nvidia, rounding out the top five performers on the nasdaq. for that quarter just ending today, the nasdaq up 28%, although down seven of the last eight trading days as we headed into the end of the quarter. the nasdaq up 17.5% over the three-month period. now, today it did split only 37 of those 14u7b stocks went higher. a bit of a negative tone at the end of the quarter. but you can’t argue with the 20% performance. back to you in the studio.
>> anthony massucci from the nasdaq market site. while the moves of the stocks and bonds have dominated headlines for the first half of the year, could commodities be the asset class to watch for now? our next guest says yes. he is andy polarra, portfolio manager helping to oversee $5 billion at r.s. investments. his contrarian fund is up over 24% so far this year. and his natural resources fund is up over 15%. he joins us from our san francisco bureau. thanks for being on the program.
>> you are welcome.
>> so commodities, we’ll give you a free pitch here as to why commodities are the place to be.
>> well, bob, if you looked at what zbog on in the economy here in the stock market, you want to look for places where there has been little compatadded in the last three year and little future compatcapacity forcasted. one of the specific areas we came up with was commodities from the positive side. one of the places you want todd avoid was telecom and technology. and the other issue right now swhen you look at the 20-year bear market in commodities, it really has been associated with the disinflation we’ve seen in the united states economy. we believe we’ll see some inflationary pickup in the next three to five years. the correlation was inflation picking up and good commodity performance is pretty tied.
>> i want to know if natural gas is part of that formula or prediction. i’ve drawn up on the bloomberg terminal a chart of natural gas prices. we see it’s at $5.41. certainly this one-year chart shows an upward trend. during the month of june here if i zoom in on that area, we see falling natural gas prices for the last month or so. what about natural gas?
>> well, we are very bullish on natural gas in the next three to five years. coincidentally natural gas started the decline subsequent to the greenspan comments about natural gas. plain and simple on a supply/demand basis we are not producing natural gas fast enough to supply the united states economy. and having said that, really we’ve been―we have not been in the economic recovery that people have been talking about. industrial demand for gas has been down this year. industrial demand for gas last year is down. so we forecast over a two-to three year period of time increasing industrial demand for natural gas, and we think that demand stimulus, although it’s not going to be that great with the supply restraint here, and inability to reproduce our reserves, will create a very bullish environment for natural gas.
>> talk about your contrarian fund, it’s up over 24% year to date. as we’ve been saying it sounds counter intuitive because running with the pack would have done pretty well this year. why would a contrarian fund be up so much?
>> well, running with the pack i guess if you can look at certain parts of the pack, nasdaq and the things that are most speculative, which i guess have had 100% -- or 20/20 hindsight here, those were the best places to be so when we looked at the fundamentals and we looked at the stocks that met our valuation criteria, we found a lot of product to buy in the early part of this year. having said that, of course, if you were in the nasdaq pack you were up twice as much.
>> quickly, you like shares of fresh del monte, i understand shares up 36% year to date. it’s had a big run yet earnings in the current quarter are expected to fall.
why do you like this stock ?
>> we like this stock because we look at stocks over a long-term period of time. this is a company that has tremendous rates of return on its capital. twice the average company. it produces a terrific amount of free cash flow. on an earnings per share basis we look for earnings this year exceeding $4. this is a major branded name company available at a very very reasonable price. so we tried to avoid looking for the quarter. we look for the year.
>> andrew pilara, portfolio manager at r.s. investments.
