Analyst Looks at the State of the Market

Analyst Looks at the State of the Market

By Simon Eskow

Investment markets are a mixed bag, with some sectors performing better than others, an equities analyst said during a presentation at the New York CPA, Business & Technology Show & Conference.

“The economy is slowing, oil is a problem, but there’s bifurcation of markets: some are OK, some aren’t,” Larry Wachtel, an equity strategist and senior vice president for Wachovia Securities, said to a full house gathered for the July 20 CPE session.

“It’s a challenging market,” Wachtel said.

Wachtel, the opening speaker for the two-day conference, discussed the dynamics of each sector, from energy corporations to pharmaceutical companies to electronic manufacturers. He delved into individual segment performance, placing each in the context of current events to portray a sober view of what investors might buy, sell or hold.

Wachtel painted a varied portrait of the investing climate. Trading has just come off an 11-month bull market in March, according to a session handout, indicating slower advancement through the end of the year. The economy lost some steam from the stimulus of tax cuts and low interest rates, as business expansion peaked in the third quarter of 2003. Other issues, such as oil prices, interest rates, the presidential election and terrorism, have combined to create a “kind of stalemate” and a “sober attitude” about trading.

Investors in energy concerns, Wachtel said, need to be aware of the underlying problem that world oil supplies are dwindling as demand increases with industrialization, especially in China.

Pharmaceutical stocks have “quality, yield and demographics” but their pricing makes them less popular. Wachtel said he could make a case for buying their stocks, but the infrequency of new “breakthrough drugs” contributes to the stocks’ slow growth.

If it’s determined that past growth was spurred by low interest rates, the equities analyst said he’d consider selling stocks in home building and supply companies and taking the profits. Under low interest rates, Wachtel said, the value of such stock tripled or quadrupled in some cases.

Wachtel also pointed to some companies he considered good buys, and then took questions from dozens of audience members on other individual stocks.

Generally, Wachtel said, if investors are to speculate on stock, they have to be able to purchase 5,000 shares and sit on them for 18 months.

“I can’t promise instant gratification in this kind of market,” Wachtel said. “But I can’t imagine a dump. And when you break out, you break out profoundly.”