Nasdaq---Anthony (slow)
More good news to come
Interview: Collins & Co.---Raabe, Bruce---Chief Investment Officer
>> the nasdaq fell for a second straight day. the index has closed lower six out of the past eight trading days. for more, we’ll go to anthony massucci at the nasdaq marketsite.
>> and the nasdaq did close lower. in fact, money managers are saying there is profit-taking happening here at the end of the year with technology stocks up 50% since the lows back on march 11. they’re saying it’s a good time to lock in the positions, lock in gains, sell off some of the stock and start again in 2004. that’s what we’re hearing. john brady at man financial, a senior vice president, said it’s profit-taking at the end of the year. he said with spectacular gains in large cap technology stocks , portfolio managers are cutting back their positions so they have profits to work with next year. we’ve been hearing that and that sums it up nicely, john brady, at man financial, as to what may be going on for the nasdaq. cisco systems chief executive john chambers speaking to analysts said business confidence is improving and customers plan to increase spending on products next year and went on to say that budgets are rising for the first time in a few years, tha, that is, his customers’ budgets, as confidence is improving so painting a nice picture there and with that, cisco going to a 2 1/2 year high. b.e.a. systems, another stock here, did rise today. friedman billings ramsey said the stock is a market perform and they like it to rise to $12 in the next year. a couple of software movers, adobe, intuit, documentum. e.m.c. saying documentum may cut into profit as they bought the company. one final mover, panera bread raised to a strong buy at raymond james as the stock had been down recently but rallying 7% today on the nasdaq. the nasdaq closed down 3.5 points but the nasdaq 100 moved up five. we’ll see what happens in the morning.
>> thank you, anthony massucci.% -shares of mortgage lenders such as washington mutual helped drag stocks lower today. shares of the second largest u.s. mortgage lender were down as much as 4% but our next guest remains bullish on washington mutual and his name is bruce raabe, chief investment officer with collins & company and he joins us to offer his views. thanks for being on the program. wanted to begin with this idea that some say that all the good news may be priced into stocks already. we’ve had a huge run up in the markets and yet you say there’s there’s still more good news to come. why is that?
>> i think the nasdaq in particular as we’ve seen such a powerful run up that you need to be cognizant of the price-to-earnings ratios of the stocks and future growth and when you look at what we call peg ratios, those stocks are alarming. stocks like washington mutual, we see as a stock that at nine times next year’s earnings, paying a very attractive dividend, growing their earnings next year, again, is a different story. it’s a company that is leveraged to the residential mortgage business but they’re success this past year has been fabulous and shouldn’t necessarily mean tthe end of their profitability or growth. it’s a very diverse savings and loan and industry leader so we really think it is a stock -picker’s market and we have to look at valuation and make sure the companies we look at are growing and have a price-to-earnings ratio or price-to-cash-flow ratio that is reasonable and many stocks are not in that sector.
>> since you mentioned washington mutual, i wanted to ask about the mortgage business and what of the idea that interest rates may be coming up and mortgage rates coming up, people buying fewer homes and taking a chunk out of washington mutual’s earnings.
>> that is a risk, clearly, but it is priced in. we’ve seen the stock selloff in the last couple of days, it’s no surprise the mortgage business is slowing down and they are laying off a portion of their part-time workers. this is a natural part of the process and there’s a great deal more to washington mutual than their mortgage business and for investors looking at a stock at nine times earnings, it’s hard to find many of those, plus they have a nice dividend and are growing their earnings and this is a safe place to be at a time when valuations are questionable.
>> we were talking to steven englander, foreign exchange strategist at barclays capital, if the dollar continues to weaken, foreign investors may see the trend and pull money out of the u.s. and wouldn’t that be bad for u.s. markets? isn’t that a risk to stocks ?
>> it may be. no doubt about it. that may keep interest rates low and in that instance, that can have its plus side, as well. i think there are several scenarios that could play out next year and we’re aligned with what john chambers was saying earlier today about business spending picking up and that’s the driver in our mind to a healthy economy next year. consumer spending has always been strong and with the fed’s comments from yesterday, we see a very, very attractive environment for business. our focus is on valuation and that’s really why investors need to focus, on good companies at reasonable prices.
>> why do you like fidelity national financial?
>> heavily leveraged to the mortgage business, but their title insurance business. this company is reinventing themselves with fabulous cash flow allowing them to expand, cutting exposure to mortgages to 50%. well-run, highlighted in “barron’s” this week and a correction, the stock makes an attractive buy at nine times earnings.
>> when we return, sony is betting on a new game player to turn around its price slide.
