Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: We have national editor Bob Lenzner with us, along with senior editor Elizabeth MacDonald, staff writer Leigh Gallagher and senior reporter Victoria Murphy. Bob, you recommended Tyco (TYC) back when it was $8. What is it now?
Bob Lenzner, national editor: $17. At a luncheon this week, Bill Miller of Money Managers of America suggested that both Tyco and Comcast (CMCSA) are going to double and are on his list of stocks to buy.
David Asman: Wait a minute, Tyco and Comcast are going to double? Within what amount of time?
Bob Lenzner: He didn't give a time on Tyco and he gave three years on Comcast. Comcast is a cable company. Just bought AT&T's cable.
David Asman: You recommended Tyco at $8. It's now $17. Will it double again?
Bob Lenzner: It's not me saying it. It's Bill Miller saying it and he's got one of the most fabulous records in managing money in America.
Leigh Gallagher, staff writer: He's made some precious bets this year, Kodak (EK) being one. He also made bets on AOL (AOL) and those obviously didn't pan out, but he's one to watch.
David Asman: What do you think about Tyco?
Leigh Gallagher: Well, it did as Bob said.
Bob Lenzner: It is at its biggest position. 6 percent of the portfolio
David Asman: Well, you would have thought it was a counter-trend because of all the scandals they had, but Carnival Cruise Lines (CCL) is the most counter-intuitive stock pick I would have imagined.
Leigh Gallagher: It is, but I'm going for it. Carnival is the $15 billion leisure cruise conglomerate. It owns six or seven brands under Carnival. It's down to about $26 right now and there has been many recent and well-publicized episodes of gastrointestinal illness on cruise ships. Only two were Carnival's, but the industry's really suffering because of this right now. This is pure, overblown media hype, just like the shark epidemic of two summers ago.
David Asman: But people were getting sick.
Leigh Gallagher: They were, but this happens all the time. This happens every year. There was an outbreak in Alaska on six cruise ships you never heard about. Bottom line is this is a solid company. People are flocking towards cruises like never before. There are record numbers.
David Asman: Victoria, you agree with Leigh on this?
Victoria Murphy, senior reporter: Yeah, I agree with Leigh for two reasons. First of all, if you look at January's prices for cruises, they're either flat or up, so people aren't flocking away despite the illnesses. Also, Carnival is an especially good pick because they are likely to acquire Princess, which will make them a cruise Goliath. It will put them in a really good spot.
Elizabeth MacDonald, senior editor: It's almost as if the companies want the investors to ride their cruise ships through a strait of formaldehyde before they invest. It seems to be what's keeping the stocks up. The stock has some price pressures, but I think what you're saying is baby boomers are going to flock to convenience and they're going to avoid air travel because they're scared.
David Asman: Carnival Cruise Line is a counter-trend. Let's go to Victoria Murphy. BMC (BMC), a software company, Victoria?
Victoria Murphy: Yeah, I think BMC Software is in the right place at the right time and they're not getting the credit for it. They make software that helps companies cut costs on stuff like servers and storage. They also recently made an acquisition of a company called Remedy that adds to their product line, but more importantly gives them about 6,000 new customers to cross-sell. So, I think they're in a good spot.
David Asman: What's the multiple, Victoria? Is it expensive?
Victoria Murphy: It's not too expensive. Right now, they're not too profitable, so they don't have a multiple, per say. But, they are expecting to be profitable in the near future with the acquisition of Remedy.
David Asman: So, look for BMC. We're up on BMC, but you're not so up on SBC Communications (SBC).
Elizabeth MacDonald: Unfortunately, the baby bills are getting their lunch eaten by WorldCom and AT&T. WorldCom and AT&T have seized upon what state regulators are allowing in the form of local competition. These two competitors are getting local access to SBC and the baby bills. So, what you see happening at SBC is the old time little earnings machinations around the fringes.
David Asman: Anything good about these baby bills?
Leigh Gallagher: I don't think so. The baby bills are getting hit from all sides. The total number of local phone lines dropped last year for the first time since the Great Depression. So, it doesn't look good at all.
Elizabeth MacDonald: I think it's unfair. Leigh wouldn't you agree that it's unfair?
Leigh Gallagher: Yes.
David Asman: Thanks everybody.
Makers & Breakers
David Asman: This week our guest stock picker is Rob Stein, managing editor at Astor Asset Management. He is also author of Inside Greenspan's Briefcase. Let's look at the stocks he's brought along and here to ask the tough questions are senior editors Mike Ozanian and Matt Schifrin.
Chicago Mercantile Exchange (CME)
Rob Stein, Astor Asset Management: MAKER
It's been around for a very long time. It just went public this month. It's been growing its revenues at 14 percent since 1970 and they have a monopoly. Additionally, it's trading below the other exchanges that are currently public.
Mike Ozanian, senior editor: BREAKER
Right before it went public it had been losing money for years and then all of a sudden we got ready to do the IPO and it was suddenly profitable. That always makes me nervous about the accounting.
Matt Schifrin, senior editor: BREAKER
I'm also a little nervous. Whenever you have a bunch of sharp traders selling out the public, I'm a little nervous. The stock's already up 35 percent and there's a lot of competition
David Asman: Two against one. Rob, you get a rebuttal.
Rob Stein: This is an industry that's being very localized. It's the largest futures exchange in the world. Their cost for doing transactions is declining as volume is increasing. It's been growing steadily throughout the years. I think you're going to see the stock appreciably higher.
Bank of America (BAC)
Rob Stein, Astor Asset Management: MAKER
Well, if you have to pick stocks right now, as a whole, you want to pick something in the financial sector. The banking industry is staying pretty stable. With the spreads from interest rates right now, Bank of America is very diverse. They're expanding into Latin America. It's a great stock to hold for the long term and as the economy turns around, credit spreads are going to be in their favor.
Matt Schifrin, senior editor: MAKER
I like Bank of America also. I like the low PE of about 11. I like Kenneth Lewis. Their CEO is low profile. I think he's doing the job.
Mike Ozanian, senior editor: MAKER
I'm in too. I like this stock. They don't have the risky loans of banks like JP Morgan Chase (JPM) and it has a rich dividend of 3.7 percent. I'm a buyer.
David Asman: What about the exposure of real estate? If the market of real estate goes down, does that hurt it?
Rob Stein: It's pretty much diversified. It has some exposure to west coast real estate, but not enough to hurt it. Same thing with Latin America. It's not really on the hook as much as some other banks.
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