Muddled by inconsistent earnings and stock performances, one sector appears tougher and tougher to predict, CNBC's Jim Cramer says.» Read More
For a long time now, the magic phrase for stocks has been "global exposure."
Top leisure industry analyst Robert LaFleur indicates it's as true in his sector as it is anywhere.
The gaming, lodging and leisure analyst for Susquehanna Financial Group says room rates have been able to keep ahead of inflation, although the margin is narrowing.
"You've had a lot of talk about the weak dollar, and its impact on people staying closer to home, and also drawing Europeans and Canadians here, so we look at a company like Starwood [Hotels & Resorts Worldwide] ," he told CNBC. "It has a broad international diversification across multiple price points and multiple brands."
"Marriott is not as internationally diversified as Starwood," he said, "[but] really, it's got every brand across every price point, very high quality operators, extremely attractive from a valuation standpoint."
What should investors look for in retail stocks this week? Dana Telsey of the Telsey Advisory Group made some suggestions on CNBC's "Squawk Box" Wednesday.
Dana Telsey: I think you have to look for some of the companies that still have room to grow their store base. I certainly think all the elements...we are definitely seeing, and it's coming up in the earnings results of retailers that are reporting first-quarter earnings this week.
Carl Quintanilla : Yeah, Gymboree , J. Crew , lululemon , and Nordstrom . Are those your picks?
Telsey: Yep, those are definitely some of our picks. We see the opportunity for those companies to open more stores. They're not saturated where operating margins still have room to move higher, and where there is sales growth. The one key element that investors value is the opportunity to have topline sales growth.
CARL: What differentiates them? Are they price-pointed at an area where the consumer is relatively safe? In the case of J. Crew, is (CEO Millard) Drexler doing something just from a fashion standpoint that's going to keep people interested, no matter how thin their pockets are?
Telsey: With J. Crew, it's all about new and different. The product innovation is there. Consumers actually are looking to pay the full prices for it, because they're not keeping a lot of inventory in stock, and in addition to that, they're still not at their operating margin potential, and they're not saturated in their store base.
CARL: Interesting. Would you say you would prefer apparel, or mainliners, or discounters? In terms of sectors within your business, what do you like the best?
Telsey: I think one of the things we're looking at is, we're looking at the value retailers being very important, so when we think about value and certainly the children's area with Gymboree fits into that, because with their new concept, Crazy 8, it is at a value, and when we think about newness and differentiation with a concept that's just beginning, it's lululemon, because they're offering the social retail network, and they're creating almost a new channel, and when we think of the mainliners, it's Nordstrom, because they are opening stores this year, and we think those store openings will position them well into the future.
Michelle Caruso-Cabrera : You know, I do a lot of Yoga. Everyone in that room is wearing lululemon, and that's expensive.
Carl: Judy went shopping, she was trying to buy some work clothes the other day, and she couldn't find anything at Gap . All the stuff she likes is at J. Crew, which is like, you just follow the Drexler, right?
Telsey: Exactly. We did a poll of the women in our office, and basically, at least 20 percent of the wardrobes are coming from J. Crew lately.
Carl: Interesting. You think the stimulus checks are going to have any effect at all, Dana?
Telsey: I don't think they're having a lot of effect at all, unfortunately. I think it's going to gasoline and paying down debt. I think the second quarter is always a challenging time for the retailers, because they don't have a holiday season in order to offset some of the expenses.
The golden age of the railroad is back,saysGary Kaminsky. TheNeuberger Berman managing director says "therail story" is a key to America's economy now -- and hetold CNBC which rail stocks his firm holds.
"Rail moves everything: coal, grains," saidKaminsky, who will retire from his MD post at Neuberger onJune 30.
And he said the railroads are going to keepgrowing, as trains are helping companies avoid the soaringcosts of gasoline- and diesel-powered automotive carting,as oil prices climb.
"In the Midwest, you see the 18-wheelers[used for transporting goods]...coming from California, areactuallyonthe trains," he said. "The rail story...isseparate within the transports."
The relentless climb of oil prices hasstolen away the headlines, but the credit crunch is still afront-burner issue for American financial companies andtheir stocks. JPMorgan ChaseCEO Jamie Dimon has admitted that his bank'spurchase of Bear Stearns is risky and, at this point, farfrom complete.
Five-star fund manager Barry James says it's a tough time to be putting money into the stock market, but an investor would be wise to focus on large-cap stocks.
"I think we've reached the end of this rally, and we're likely to back into the bear mode. Large stocks are the right place to be in this type of market," the president of James Advantage Funds told CNBC.
"But," he added, "to jump into stocks wholeheartedly at this juncture, I think, is probably a mistake."
James thinks bonds are the best investment, particularly Treasurys , but he has some favorite equities as well.
"We like things that have a lot of international [exposure], have good earnings, are relatively cheap and have been holding up better than the market," he said. "Stocks like AT&T, which you also get some dividends with; Wal-Mart, ExxonMobil and Owens-Illinois, so there's some industrial in there. A lot of international play and companies that are buying back shares are pretty important at this juncture in the market."
Robert Millen, co-portfolio manager of the 4-star Jensen Portfolio Fund, puts the words "quality" and "growth" together and comes up with some potential profits for your portfolio.
His fund is up an average of 7.81 percent per year over the last five years.
"We really try to buy the business as opposed to the stock," he told CNBC. "We're looking for businesses that are very well run, strong financially, have high returns that are generated through durable competitive advantages, and have the consistency of earnings and dividend growth typically well into the future."
Like many other fund managers, Millen also likes companies with significant international exposure.
Millen's first pick is Emerson Electric.
"Emerson has about half their sales overseas," he said. "This is a company that's increased their dividend for over 50 years in a row."
He also likes Procter & Gamble.
"[It's] well known to everybody, especially the brands that they sell," he said. "Over 60 percent of their sales overseas, focused on those economies where rising standard of living will bode very well for the purchase of their products."
A third choice is Praxair.
"They make industrial gases, both atmospheric and processed gases," he said. "Again, 50 percent of their sales overseas, and they basically help businesses manage their industrial production."
Millen also likes the company's strong recurring revenue stream.
Oil companies are making historic fortunes these days, but without the oil services companies, they can't sell a drop. So which oil services companies can pump the biggest returns for investors?
It was a week of full of economic and M&A headlines.
Risk aversion is dissipating from the markets, according to Jay Bowen, president of Bowen, Hanes & Co. Translation: Investors aren't as scared as they were.
"We like the market signals that we're seeing," Bowen told CNBC. "I think a very important event happened a few weeks ago, when the two-year Treasury moved above the Fed Funds Rate for the first time in about 20 months."
He sees the change in the yield curve as a strong signal that waves of liquidity are coming out of bonds and into stocks.
Bowen's buying attention is focused on global infrastructure.
He likes American companies with international exposure, and he especially likes foreign multinationals.
"A company like BASF, for instance, the largest chemical company in the world," he said. "Through joint ventures, they are involved in literally every country around the world."
He also likes Swedish-Swiss engineering company ABB.
ABB's interim chief executive told the firm's recent annual meeting that another 20,000 jobs are expected to be created over the next five years.
Darren Chervitz of Jacob Asset Management has found some promising investment ideas -- right here on the Internet.
His four-star Jacob Internet Fund is up an average of 18.2 percent per year over the last five years.
Chervitz expects consumer spending to continue to be a drag, offset by international exposure and the weak dollar. He particularly likes small-cap tech stocks with beaten-down valuations, stocks of companies that appear to be likely targets for acquisition.
(See below for CNBC.com-exclusive pick)
He likes TheStreet.com, suggesting that the online market site could be a candidate for acquisition by a large media company looking for an Internet presence.
He also recommends Digital River, which helps companies move their business online. Shares were hurt when the company's largest client, Symantec, renegotiated its contract, but Chervitz expects the effects will have passed by the end of the year.
Chervitz also offered a bonus selection for CNBC.com -- not revealed on TV.
He likes Shutterfly, the leading online photo service. The company does a brisk business in personalized products like scrapbooks, beverage mugs, and calendars. It's expected to fulfill more than eight million orders this year. He also notes there has been some insider buying by management in the last week.
Chervitz owns TheStreet.com and Digital River through his fund.