While sometimes not in the habit of advising individual investors, the money managers we speak to weekly do occasionally give us here at TWST a few words of wisdom about the current investment environment:

• Daniel Bandi, CIO in Value Equities at Integrity Asset Management: “I’d never advise somebdoy to have all their money in small cap value or all their money in large cap grwoth, but you need to pick an allocation that gets you fairly well diversified and stick with it through the good times and the bad.”




• Paul Gardner, Portfolio Manager for equity and fixed income with Avenue Asset Managemeent: “Be careful. We’ve had a big run in the last number of years. Have some cash on the sidelines. The commodity boom has played itself out quite nicely. I would think that generally buying good companies over the long term would help you the most.”
• Jerome Bruni, founder and president, J.V Bruni & Co: Rising inflation is always a risk, although I don’t foresee it becoming a sigificant one at the present. The economy will go through recession from time to time, but that is not a significant long term risk…Well-intentioned but poorly designed government policies are always a potential risk…In addition, political efforts to commit the country to programs that are difficult to fit without our national financial means represent another risk.”

For our full investment strategies report, complete with more market advice and stock picks, click here.

We talked this week with Michael Fox, JPMorgan’s Senior Equity Research Anaylst for the business services sector. He covers the commerical real estate services space, and told a little about this mostly fragmented sector. He did have high praise for a few companies, and one of those was CB Richard Ellis (CBG).

TWST: Give us a quick overview of why you like CB Richard Ellis. What’s the story? Where are their growth opportunities?

Mr. Fox: CB Richard Ellis has built a well-diversified platform largely from the brokerage business and about two-thirds of its revenues or slightly more than that come from the Americas. I think the biggest opportunities for the company are in Europe and Asia, where it has very strong footprints and it should continue to gain market share. The other major opportunity is growing its global outsourcing business that it bolstered with the Trammell Crow acquisition. It now has relationships with 85% of the Fortune 100. This is a great opportunity because Trammell Crow built those relationships in the United States and now with the global platform of the combined company, these relationships can grow on a global basis. That’s going to be a tremendous revenue growth opportunity over the next few years. In addition, the revenue from outsourcing is much more stable than the transactions business. It’s the type of business that once you win it, you usually have it for a long time and it’s not cyclical. It also leads to a lot of transactions business.

For the full interview with Mr. Fox- including a complete overview of the commerical real estate services sector, and more stock picks, click here.

With the recent suprime scare, there has been quite a bit of a downturn recently on the residential side of building materials. However, an anaylst we spoke to this week feels that the downturn may still have lower to go, and may extend into commerical building materials as well.

 TWST: What’s the evidence that we’re beginning to see a commercial downturn?

Mr. MacGregor: We do a lot of surveying of privately owned construction materials companies across the United States. We’re hearing of slowing orders, some programs being deferred. Some of this is to be expected. If you look at the historical data, commercial construction spending, certainly in retail, tends to lag residential construction by 12 to 18 months. Intuitively it makes sense. You build a number of homes in a new area, after which you need to build strip malls and other commercial infrastructure that would accompany that type of residential buildout. If you are not building houses for a period of 12 to 18 months, the construction of commercial retail really begins to slow down rather dramatically; that is where we are now. As far as office space is concerned, that generally tends to be a little more associated with slowing in the economy. We’re seeing more evidence of that on the coasts than we are in the middle of the country, but my guess is that it won’t be very long before we see this trend spread to the central regions.

For the full building materials issue, with a complete overview of the sector and stock picks, click here.
 

Each week, we here at TWST speak to a number of different portofolio managers- each with a unique investment philosophy. For example:

Speaking this week with portfolio manager Beth Dater, we learned a little bit about  the kind of fundamental investing that goes on at her company, AG Asset Management.

TWST: Would you take us through the investment process and tell us what criteria you’re looking for in potential holdings?

Ms. Dater: First of all, it’s fair to say that throughout the firm we are fundamentally driven, and that all of our teams achieved their returns through engaging in detailed and very systematic fundamental research. Incorporated into that is risk management. In addition to that, our investment process incorporates the desire to be able to identify the best long-term investment opportunities at the earliest possible time. The way that we go about that is to look for what we might call a dynamic of change or a catalyst and that could be any number of things. It could be a new business, it could be a new product, it could be a management change, it could be a financial restructuring or it could be a geographic diversification. Basically we are looking to identify that element, and then to understand where we are in that process and whether the company or the prospective investment meets our valuation criteria, which may differ slightly from team to team…In terms of the criteria for companies, we’re looking at unique products and services; we’re looking for a strong financial condition or the potential to achieve a strong financial condition.

For the full interview with Ms. Dater, including an overview of fundamental investing and stock picks, click here.

In our discussion of Northeast Banks this week, there has been a lot of “doom and gloom” due to the recent subprime issue causing a slowdown on all fronts.  In spite of all that, however, our analysts have found  a company they are excited about: Hudson City Bancorp (HCBK).

“Hudson City…stands out for the obvious reasons. Here these guys are able to take advantage of the disruption in the mortgage market. They operate a very clean and simple portfolio lender model in a great market with a very disciplined management team, and have the benefit of an excess capital base. “

“I think there still is a lot of value to be had in this company, probably on the mortgage side; I’ve got projected growth to exceed 30% this year and next year. And given the overhead, it costs them virtually nothing to add an additional dollar of loans. So they have the structure in place to really let the increased volumes add substantially to their bottom line. So the model I think is there. And then, longer term, I think one of the other hidden gems is what they have the potential of doing on the deposit side.”

For the full Northeast Banks issue, complete with more stock picks and a full overview of the sector, click here.

JAG Advisors is an asset management company based in St. Louis, Missouri, offering separately managed account management services to individuals and instituttions. This week we spoke to president and CIO Norman B. Conley III, who deals with their large cap growth account. These were five picks from his interview:

1. Precision Castparts (PCP)-  Precision Castparts manufactures complex metal components, primarily for the aerospace industry. Though not a household name, they are a $20.5 billion company, that has consistently outperformed consensus analyst estimates- in fact- they have done so in seven of the last seven quarters.
2. Google (GOOG)- Ever heard of them? They’ve been in JAG Advisors portfolio for the past two years. They have attractive earnings momentum, with no expectation of slowing down anytime soon.
3. Celgene (CELG)- Celgene is a biotechnology company that develops drugs to treat autoimmune disorders and cancer.  The Street expects them to post double earnings this year. JAG expects 40%-50% earnings over the next two years. As Celgene trades at 40 times forward earnings, its forward p/e ratio is below its growth rate, leaving room for further upside.
4. American Movil (AMX)- A Latin American wireless company, was first purchased by JAG in Decmeber 2004, and their still bullish about it. They feel it’s undervalued at 16 times forward earnings, seeing as grown 30% annually over the last several years. Investors have simply been misvaluating due to the fact that the company is Latin American.
5. Gamestop (GME)- For those of you  who never were 16 year old boys, Gamestop is the leading domestic retailer of video game software and accessories. JAG sees this as a great stock going into the holiday season, due to their dominance in the marketplace.

For our full investing strategies report, including interviews with 5 different money managers and more stock picks, click here.

Taking a closer look at Northeast Banks this week, we spoke with analyst Chris Marinac who talked a little about how Northeast Banks compare with banks in other parts of the country, and where opportunities lie for the immediate future.

• Northeast Banks have had slower growth than banks in other part of the country, due to less construction and broker funding. At the same time, Northeast Banks have less risk from excess construction.
• Subprime lending in the Northeast was less acute; less of a driver of our inceremntal loan mortgage production and home sales.
• In terms of competition, the Northeast is in the place as the rest of the country: compeition will be fierce, and a result it’s not going to be easy for banks to lower their money market accounts or savings accounts.
• An area to find opportunities in the near future is New Jersey. With the recent change at Commerce bank, investors should take a look at well positioned banks on both the private and public sides.

For the full interview with Chris Marinac, with an in depth look at the situation in Northeast Banks, click here.

With all the worry about subprime mortages seeping into every area of market, where is an investor to turn? In our focus on Northeast Banks this week, we spoke with one analyst who named a few banks that stayed out of the whole subprime mess.

 Mr. Kovaleff: New York Community Bancorp (NYB), which has a portfolio of rent-controlled and rent-stabilized apartment buildings. They have seen no deterioration in credit quality, or anything else like that. Similarly, Hudson City Bancorp (HCBK) is another really big thrift. In terms of involvement with mortgages, their portfolio is pristine, no subprime or CMOs at all.  

For our full Northeast Banking issue, complete with roundtable discussion and CEO interviews, click here.

Pork producers have had a strong couple of years of profitability recently, resulting in strong balance sheets. Recently, however, they have been in a bit of a rut, and the question remains as to how they will weather the storm. 

In speaking with analyst Farha Aslam this week, as part of our agribusiness report, we heard one opinion, that the future strength of pork producers rests on China.

Recently, China has had issues with the health of its hog herds. While China has been importing signifcant amount of US poultry, it has announced that it is going to order only 60 million pounds of pork through December.  Ms. Aslam sees that as a potential sign of things to come, that might very well drive the price of pork up and make weathering the storm for pork producers difficult.

 For the full interview with Ms. Aslam, including a broad overview of the Agribusiness sector and stock picks, click here.

Every week at the Wall Street Transcript, we speak to a handful of Portfolio Managers. In 2006, we spoke to over 200. This is only a small part of the Portfolio Management firms in the U.S., not to mention around the world. With so many choices, we here at TWST make sure to let our readers know what makes the Portfolio Managers we speak to unique. TWST asks: What makes you unique?

• Samuel Dedio, Julius Baer Investment Management: ”First, we have a dedicated team of six analysts (including myself) looking at small cap companies within assigned sectors. We are concentrated in nature, so when you look at our number of holdings versus the number of investment professionals working on them, it’s an average of eight companies per analyst. This shows that there’s quite a bit of research and analysis that goes into the discovery process.
• Brian M. Barish, Cambiar Investments: “In our concentrated approach, we certainly do have more of a focus on high balance sheet quality, high franchise quality companies than a lot of other value-oriented managers have. We tend to have more S&P 500 as opposed to value-index-like sector weightings and over time that has benefited our results fairly materially. We are privately held. That puts us automatically in a relatively small minority of institutional managers.”
• Richard Jandrain, Fort Washington Investment Advisors: “Our process is unique, but the other advantage that we have is the people who are behind the process, and that is our team. If you look at our team, we average 20 years of experience. The other thing that we have is that we have been working with each other for 10 years or better. That’s another thing you don’t see in many teams. A lot of times, team is used as kind of a buzzword. It’s not a buzzword for us, it’s a reality.”

For our full investment strategies report, including full interviews with each of the above portfolio managers, click here.