Generic drugmakers
Interview: Richard Sichel---Chief Investment Officer---Philadelphia Trust
>> welcome back. we’re moving on here and of course we’ll start off with a story we’ve been discussing a lot, and that is parmalat and bondholders owed about $5 billion by the italian food giant face a losing battle trying to get their money back. italian bankruptcy law doesn’t favor bankers over bondholders, but the new chairmen brought in last month on the finances is expected to focus on repaying banks owed $2.5 billion. for one thing, parmalat may need the banks to listened it more money to stay afloat. bonds have been trading about 20% of face value, its alleged financial fraud may amount to $11 billion. our next guest is bullish on healthcare stocks , especially generic drugmakers. he says investors should have a diversified portfolio of healthcare stocks and industrials. richard sichel, chief investment officer at philadelphia trust joins us appropriately from the city of brotherly love. thanks for joining us. why now generic drugmakers?
>> well, we’ve liked them for some time, but we do like the healthcare industry a lot. the big pharmaceutical companies have not performed that well. we think they will. in the meantime, the generic companies like pharmaceutical resources or ivax, they have a lot of good products, good marketing skills and we think you need to be well diversified in the healthcare industry.
>> but they had good products and marketing skills six months or a year ago. what’s changed?
>> it’s more of the same. they’ve done well and we think they’ll continue to do well. there are more products coming all the time off patent that they can market. these companies have gotten better at it.
>> will they do better than the overall markets? that’s what you’re saying?
>> we’re hoping, and we think so. again, if you have seven, eight, nine stocks in the healthcare industry, that group will do better than the market, yes.
>> and you also like industrials, the dow jones industrial has been an outperformer in december. is that going to continue? or i guess it’s fair to say you believe it is going to continue.
>> we believe that the economy is growing. it won’t grow at an 8% rate, but if it grows at 4%, 4.5%, that’s sufficient to have the g.e.’s of the world and raytheons do well over the next or so.
>> industrials, we focus on the dow jones industrial average, those 30 stocks but obviously you need too dig deeper. what from particular in the industrial sector, what do you like specifically within there?
>> well, i think you can look at chemicals also in the erls area which could be considered part of industrials and air products or an eastman chemical. again, with the economy growing, these are the companies that are poised to really have earnings momentum and you’re not paying too high of a price/earnings ratio at this point.
>> how about mcdonald’s? that’s a dow jones industrial stock .
>> well, that’s obviously in news today. it’s a shame. it’s probably a buying opportunity. we don’t have it. we really have not invested in it, but it is subject to getting hit on news that we’ve had the past few days, and for somebody who’s nimble, it’s a good company. mcdonald’s should be around for a long time and is probably a good investment.
>> just for disclosure reasons, is that a stock you personally own personally or in your portfolios?
>> we don’t have mcdonald’s. we have the others i mentioned.
>> but you might soon based on the decline?
>> it’s a possibility. you get opportunities.
>> ok. fantastic. let’s talk about, mr. sichel, some of the things that you are getting rid of. we mentioned you’re trading in some of your retailers, exchange, as we say in the retail business.
>> well, we’re cutting back, partial exchange. lowe’s, target, companies like that. we try to have 3% to 5% positions in a stock portfolio, and fortunately some of these have grown to more than 5%, so we’re paring back some and have been for a little while so, near the high, which is a nice way to do it and still holding on to some positions. but they’ve done well and we think the leading companies will do well in the future. we don’t want to get out of them but we do want to pare back a little.
>> under 30 seconds here. would you look at the underperforming retail stocks ? best buy, circuit city? would you look at those as a replacement? 20 seconds, sir.
>> the electronics are a little tougher. they’re more volatile than, say, the types that we’ve mentioned. i think maybe i would rather look at wal-mart or something like that or lowe’s or home depot. i think you’ll have steadier results with companies like that.
>> all right. thank you very much, perfect timing and excellent segue, richard sichel, chief investment officer, philadelphia trust, because when we get back, the last-minute shoppers poured into stores ell―earlier this week. retailers such as wal-mart say a significant pickup in fat traffic was the reason for that. was it enough for the slow start to the holiday season?
