Sunday, July 30, 2006
artigo do fisher
The Short, Sharp Shock
Kenneth L. Fisher, 08.14.06, 12:00 AM ET
More From Kenneth L. Fisher
pic
Irreplaceable?
Who Funds Hezbollah
Behind the GM-Nissan Dance
Six Sarbox Stocks to Love
Shell Shocked
Complete Contents
Related Quotes
SDX 50.22 + 0.56
SDX 50.22 + 0.56
There are corrections, and there are bear markets. What we're experiencing right now is a correction. Know the difference. As this column went to press, the Morgan Stanley World Index had fallen 11.5% from its May 9 peak to its June 14 bottom--and then risen. The damage may not be over, but it's not the beginning of a sustained bear market. You should be buying stocks now. There's more bull market ahead before any real bear market.
What makes me confident that the decline will be short and small? Corrections and bear market beginnings act very, very differently. Having the one means not having the other. And this decline has the distinct fingerprint of a correction.
Corrections are preceded by spike tops. You see a rally (such as we had in the first four months of this year) followed by a sharp cliff that takes the market down 10% to 20% in a very short time. The retreat is over very quickly, in one to four months. Usually, there's a story to go with it. In the correction of 1999 the explanation was the upcoming Y2K crisis, which didn't happen. In the current spill a common rationalization is that the new Federal Reserve chairman, Ben Bernanke, is bad news for equities. It reminds me of the five-week 10.4% correction of 1979 that accompanied Paul Volcker's ascension to that job. The Bernanke scare is just another one of those silly stories that accompany corrections. In time the explanation wears thin and the bull runs.
The adage is true: "Bull markets die not with a bang but with a whimper." The crash of 1987 is the last century's only real exception, and in many ways it was simply an oversize correction. It was big, fast and over fast. By contrast, the bear market of 2000-2002 accumulated slowly. For 11 months around the market peak in March 2000, the Morgan Stanley (nyse: MWD - news - people ) World Index never wandered outside a 9% band. But that slow and painful downturn was the prelude to much worse. At the bottom the world index was off 51% from its peak.
Buy stocks now, before it is well understood that the recent correction is a short-lived phenomenon.
I recommended France's Suez Lyonnaise (39, SZE) last Sept. 19. It is up 35% since then and has more room to run. It is the only firm with liquefied natural gas degasification plants in both Europe and the Western hemisphere. Despite a run-up Suez is relatively cheap at 16 times 2006 earnings, 80% of annual sales. Your dividend next year should be close to 4% of today's price.
I really dislike the French, so I love buying from them cheap and selling back later at higher prices. France's Sodexho Alliance (nyse: SDX - news - people ) (47, SDX) provides food services in 70 nations to institutions like prisons, hospitals and nursing homes. With $15 billion in sales, it's the giant in its field and benefits from economies of scale. It grows nicely yet sells at 50% of annual revenue and 13 times likely 2007 earnings. If all goes well, you will be selling in a year or two at a much higher price and the buyer will be French.
Popular (18, BPOP) is Puerto Rico's largest bank. Recently it hasn't done well, a reflection of its expansion on mainland America eating into profits. The stock is off 33% over the past nine months, even as the global market has risen 15%. Not too popular. But an acquirer can eliminate those costs. Popular is cheap enough to be taken over by any regional, national or global bank. There is no control holder to stop a hostile bid. Its boutique onshore operations (it has 32 branches in New York, for example) can be consolidated with those of the acquirer, lowering the effective cost. You can turn the price/earnings ratio of 11 around to get a 9% earning yield. A medium-grade corporate borrower (rated BBB, that is) sports an aftertax cost of money of 4% or thereabouts and so could pay a premium in the takeover and still pick up a 4% spread as free money. If the managers of Popular don't get their stock up soon, someone else will do it for them.
CHC Helicopter (23, FLI) doesn't have quite the same takeover appeal, since insiders control the company. But it's a great energy play, good enough that hostile takeovers are irrelevant. CHC's 200 choppers are running flat out on energy exploration. The higher oil goes, the more money it coins. If you think, as I do, that oil should be very firm over the short to intermediate term, then you can look forward to strong CHC profits. At 12 times my estimate for 2007 earnings and only 1.2 times revenue, it's cheap and ripe. But be careful not to chase the shares. It's smaller than my usual stock pick, with an $830 million market cap and an average daily trading volume of only 15,000 shares.
Kenneth L. Fisher is a Woodside, Calif.-based money manager. Visit his homepage at www.forbes.com/fisher.
Kenneth L. Fisher, 08.14.06, 12:00 AM ET
More From Kenneth L. Fisher
pic
Irreplaceable?
Who Funds Hezbollah
Behind the GM-Nissan Dance
Six Sarbox Stocks to Love
Shell Shocked
Complete Contents
Related Quotes
SDX 50.22 + 0.56
SDX 50.22 + 0.56
There are corrections, and there are bear markets. What we're experiencing right now is a correction. Know the difference. As this column went to press, the Morgan Stanley World Index had fallen 11.5% from its May 9 peak to its June 14 bottom--and then risen. The damage may not be over, but it's not the beginning of a sustained bear market. You should be buying stocks now. There's more bull market ahead before any real bear market.
What makes me confident that the decline will be short and small? Corrections and bear market beginnings act very, very differently. Having the one means not having the other. And this decline has the distinct fingerprint of a correction.
Corrections are preceded by spike tops. You see a rally (such as we had in the first four months of this year) followed by a sharp cliff that takes the market down 10% to 20% in a very short time. The retreat is over very quickly, in one to four months. Usually, there's a story to go with it. In the correction of 1999 the explanation was the upcoming Y2K crisis, which didn't happen. In the current spill a common rationalization is that the new Federal Reserve chairman, Ben Bernanke, is bad news for equities. It reminds me of the five-week 10.4% correction of 1979 that accompanied Paul Volcker's ascension to that job. The Bernanke scare is just another one of those silly stories that accompany corrections. In time the explanation wears thin and the bull runs.
The adage is true: "Bull markets die not with a bang but with a whimper." The crash of 1987 is the last century's only real exception, and in many ways it was simply an oversize correction. It was big, fast and over fast. By contrast, the bear market of 2000-2002 accumulated slowly. For 11 months around the market peak in March 2000, the Morgan Stanley (nyse: MWD - news - people ) World Index never wandered outside a 9% band. But that slow and painful downturn was the prelude to much worse. At the bottom the world index was off 51% from its peak.
Buy stocks now, before it is well understood that the recent correction is a short-lived phenomenon.
I recommended France's Suez Lyonnaise (39, SZE) last Sept. 19. It is up 35% since then and has more room to run. It is the only firm with liquefied natural gas degasification plants in both Europe and the Western hemisphere. Despite a run-up Suez is relatively cheap at 16 times 2006 earnings, 80% of annual sales. Your dividend next year should be close to 4% of today's price.
I really dislike the French, so I love buying from them cheap and selling back later at higher prices. France's Sodexho Alliance (nyse: SDX - news - people ) (47, SDX) provides food services in 70 nations to institutions like prisons, hospitals and nursing homes. With $15 billion in sales, it's the giant in its field and benefits from economies of scale. It grows nicely yet sells at 50% of annual revenue and 13 times likely 2007 earnings. If all goes well, you will be selling in a year or two at a much higher price and the buyer will be French.
Popular (18, BPOP) is Puerto Rico's largest bank. Recently it hasn't done well, a reflection of its expansion on mainland America eating into profits. The stock is off 33% over the past nine months, even as the global market has risen 15%. Not too popular. But an acquirer can eliminate those costs. Popular is cheap enough to be taken over by any regional, national or global bank. There is no control holder to stop a hostile bid. Its boutique onshore operations (it has 32 branches in New York, for example) can be consolidated with those of the acquirer, lowering the effective cost. You can turn the price/earnings ratio of 11 around to get a 9% earning yield. A medium-grade corporate borrower (rated BBB, that is) sports an aftertax cost of money of 4% or thereabouts and so could pay a premium in the takeover and still pick up a 4% spread as free money. If the managers of Popular don't get their stock up soon, someone else will do it for them.
CHC Helicopter (23, FLI) doesn't have quite the same takeover appeal, since insiders control the company. But it's a great energy play, good enough that hostile takeovers are irrelevant. CHC's 200 choppers are running flat out on energy exploration. The higher oil goes, the more money it coins. If you think, as I do, that oil should be very firm over the short to intermediate term, then you can look forward to strong CHC profits. At 12 times my estimate for 2007 earnings and only 1.2 times revenue, it's cheap and ripe. But be careful not to chase the shares. It's smaller than my usual stock pick, with an $830 million market cap and an average daily trading volume of only 15,000 shares.
Kenneth L. Fisher is a Woodside, Calif.-based money manager. Visit his homepage at www.forbes.com/fisher.
# posted by robertts12 @ 8:57 PM 
