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Squawk on the Street: Street Poll
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Abby Joseph Cohen: "We Think '07 Finishes 10% Higher"
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Here’s what Abby Joseph Cohen had to say to CNBC's Mark Haines and Erin Burnett.
"We think ’07 finishes about 10% higher -- The S&P at 1550 and the Dow 13,500."
"We think the better performing stocks are those of the highest quality companies – we’re looking for above average earnings growth and above average returns on equity. We think volatility will pick up; it has been remarkably low for the past 2 years. And, as it rises, investor become risk averse. They will seek out higher quality stocks and higher quality stock markets - and in the bond markets a preference for the higher quality bonds."
"We do not advise moving into so-called defensive stocks – we think stocks that offer a high yield that don’t also have strong earnings growth are not the place to be. Instead--we are focusing on good quality growth companies because on a relative valuation basis we think that’s where the best opportunities are."
Erin Burnett asked about putting money in the tech sector, if there's a concern about risk.
Cohen replied, "In technologies it’s a mixed bag – it’s a broad escort – it’s a substantial portion of the S&P 500- and there are some industries in it where we have near-term concerns. Our analyst has been early and right about being defensive in the semi-conductors – but good we see good opportunities in software and hardware."
"As we laid out for our investors – we always have a monitoring list of things we watch carefully:
1) the pace of economic activity outside the US – keep in mind US is the world’s largest exporters.
2) foreign demand for dollar denominated assets – not so much stocks, much more so bonds …foreign investors own almost 30% of the US corporate bond market.
3) we try to factor in conservative estimates in the forecast I gave you early… our earnings estimate is one of the lowest on the street next… it assumes interest rates will be rising… that’s not our house forecast – but what I’m trying to do is give myself valuation headwinds when I do the calculation. Even if interest rates move up about 75 basis points from current levels we still conclude that the equity market are 10% under priced."
Data is a real-time snapshot *Data is delayed at least 15 minutes
