Opportunities In Large Cap Stocks Found By Matrix Asset Advisors

October 23, 2009

TWST: What stocks do you feel are representative of your investment approach and what particular industries or sectors are you favoring?

Mr. Katz: The biggest sectors right now in the portfolio are technology, financials, industrials and energy, and we also have of late been building exposure in the healthcare area where we have been under-weighted. In terms of our technology positions, we are focused on the bluest chip companies, market leaders in their respective field, so names like (DELL) Dell, Microsoft (MSFT), Cisco (CSCO) on the mega-cap side, of the mid-size businesses, companies like Novellus (NVLS) and Analog Devices (ADI). We also have some Internet exposure with positions in both eBay (EBAY) and Yahoo! (YHOO). In terms of the energy exposure right now, we like names such as Conoco (COP), Chevron (CVX), Devon Energy (DVN) and Valero (VLO). Energy actually has been one of the few groups that have underperformed the market by a significant margin this year. It was also a loser in last year’s sell off. As a result we think energy stocks have a lot of pent-up excess performance. Oil prices have gone from $35 to $70, but the energy stocks haven’t really reacted to that yet. So that’s an area that we also like. We’ve mentioned financials before. Our favorites there are names like Morgan Stanley (MS), American Express (AXP) and Western Union (WU). We also have a position in Bank of America (BAC) which has been a rougher ride than most. But we think that the company has righted itself, that they have a very good business franchise, and have easily north of $3 per share of earnings power. So right now, we think is worth in the $35 to $40 range, hence it can go up another 100% from here. Then we have a mix of other businesses like a Walgreen’s (WAG) or a Wal-Mart (WMT) or a Tyco International (TYC). On the healthcare side, we have tried to focus on businesses that are least exposed to the Obama Administration. Healthcare efforts of companies like a Medtronic (MDT) or a Zimmer (ZMH) or a Genzyme (GENZ) are all very good non-pharmaceutical businesses, which provide a lot of value and we think are less subject to politically induced pricing pressure. They are selling at 10 or 11 time earnings whereas they normally sell at an overall stock market multiple, which is significantly higher.