How Some Mavens Are Riding Out the StormApart from the resolute contrarians who saw the Dow Jones industrial average's 504-point crash on Sept. 15 as an opportunity, more than a few smart-money players cooled their heels and stayed out of the market. "The events unfolding are part of the deleveraging process the economy must endure, and the process is far from complete," says Joseph Battipaglia, market strategist at Stifel Nicolaus' Washington Crossing Advisors.
The results of Lehman Brothers' ( LEH) bankruptcy filing, Merrill Lynch's (MER) sale to Bank of America (BAC), and AIG's (AIG) bailout have yet to be determined, he notes. So he is leaving unchanged his portfolio allocation. Ditto for Donald Gimbel, senior managing director at Carret Asset Management. "Panic selling never works," he says. "We have seen this before—on 9/11, in 1987, and in 1973. The world survived, and markets made sharp recoveries." Battipaglia remains 86% invested in stocks, 11% in bonds, and 3% in commodities.
Pros like Battipaglia still favor staples that are immune to finance shocks. Among his favorites are General Dynamics (GD) (GD), the world's sixth-largest military contractor and a top maker of corporate jets, and Kimberly-Clark (KMB) (KMB), a major consumer products company. Battipaglia sees Dynamics, down to 82.12 a share on Sept. 17 from 84.93 the day before, shooting to 105 in a year. He expects Kimberly, unchanged at 64.45 on Sept. 17, to rise to 87 in a year.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.Bad News for this Mortgage InsurerYou may think MGIC Investment (MTG) (MTG), whose shares have been trashed—to 5.35 on Sept. 15, the day of the Dow's precipitous drop, down from 36.81 a year ago—has taken enough of a pummeling. But since it's a major provider of private mortgage insurance to thrifts, mortgage bankers, and other institutions, some pros expect it to skid even more. It has already fallen below the 8.35 price target of Eric Rothmann of Zacks Investment Research, who rates the stock a sell. On Sept. 17, MGIC closed at 5.49. Rothmann says MGIC continues to be battered by the rising number of delinquent loans and foreclosures brought about by the continued decline of home prices.
Kevin Cole of Standard & Poor's (MHP), who rates MGIC Investment a hold, says it may have to raise new capital, although it already raised $365 million in April to cover losses.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.From Medis, a Hot New Fuel CellFinally it's here: a small portable fuel cell that charges cell phones and other mobile devices. Medis Technologies (MDTL) (MDTL), which developed the disposable power source capable of providing multiple recharges to portable electronic devices such as cell phones, MP3 players, and handheld video games, has teamed up with Best Buy (BBY) to market the product. In mid-October, Best Buy, which is now selling a basic version, will start selling the more powerful 24/7 Medis Power Pack that can charge smartphones, such as the iPhone (AAPL) and BlackBerry (RIMM), for $49.99. BlackRock (BLK), the largest publicly traded U.S. asset manager, is Medis' biggest shareholder, with a 20% stake. Israel Aerospace Industries owns 12%.
Researcher MatrixUSA, which rates Medis a buy, says the stock is undervalued. It hit a high of 10.29 on Apr. 21 but plunged by Sept. 17 to a low of 1.97.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
Marcial writes the Inside Wall Street column for BusinessWeek. In 2008, FT Press published the book Gene Marcial's 7 Commandments of Stock Investing.