I have written that I worked with several British portfolio managers over the past 16 years. I was a partner at two different investment banking-research boutique firms and I was in charge of European sales. Basically, I dealt with foreign portfolio managers on their U.S. stock portfolios.
In 16 years I had the privilege of forging some wonderful friendships with these Brits. Which leads me to the "suckers club." Six portfolio managers (who manage a total of $34 billion in U.S. markets) and I hold an every other month conference call to review some stocks that the analytical community may be touting, but we feel collectively that they are a sucker's bet. They ain't (very un-British) going anywhere unless it's down. We held the call this morning, and I thought I'd share it with my readers here at BloggingStocks.
The number one name is Dell, Inc (NASDAQ: DELL). The group is amazed that the stock is still above $23. With accounting issues still unresolved and a reluctant Michael Dell back at the helm, there is a lot more bad news to come. These portfolio managers are astounded that the Street keeps a buy rating on Dell when "everyone knows" the forward numbers for this year and next must come down. Pricing pressure and Hewlett-Packard Co. eating its lunch does not drive earnings growth. Collectively, all felt stock looks interesting at $16-17 -- maybe.
The second one is Microsoft Corp. (NASDAQ: MSFT). Microsoft is fairly priced here. The new Vista System will be an evolution and not a revolution. The numbers will be felt positively over 3-4 years, not 3-4 months. Steve Ballmer, CEO of MSFT, has intelligently not let analysts run up the Vista expectations.
General Motors Corp. (NYSE: GM) and Ford Motors (NYSE: F). Both dead in the water, absolute shorts. Numbers will be coming down and as consumer spending appears to be slowing, auto makers are first to take the hit. Both need major, major restructuring.
After that we took a quick tea break ( I had coffee!).
Oracle Corp. (NASDAQ: ORCL). Stock is doing OK as Oracle approaches its almighty May 31 fiscal fourth quarter. Core database business is a single digit percentage grower, while the applications business is finally paying dividends for Oracle after acquiring 30 companies for $20 billion these past three years. The concern is that Oracle is renown for its lackluster research and development efforts and that upgrade cycles from the acquired companies products may fall into the mediocre camp Oracle is accustomed to playing in.
Circuit City Stores Inc. (NYSE: CC) on takeover speculation. Too expensive, margins contracting and a better target in the $13-14 price range.
Our call was interrupted by one portfolio manager's "pressing engagement" so we are to reconvene this Friday morning. More to come...
Georges Yared is the CIO of Yared Investment Research
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