The Week in Review: Looking Up In a Down Market
Almost everywhere they looked during the week, investors saw red ink flowing. The bad environment for the financials got worse. Economic data was largely discouraging. The price of oil stayed high, with little sign of an end to its climb. But CNBC guests worked hard to find bright spots in the murk.
This month's reading of the New York Federal Reserve Bank's Empire State manufacturing index came in much lower than expected, and Lehman Brothers posted its first quarterly loss since going public in 1994.
Looking away from Lehman, Ryan Lentell of Morningstar echoed support for Goldman Sachs, but said Morgan Stanley and Merrill Lynch look even better.
Ted Parrish of the Henssler Equity Fund even endorsed a bank—Bank of America, as well as the navigational-device maker, Garmin.
Goodyear Tire & Rubber may be heavily levered to oil, but Jonathan Vyorst of the Paradigm Value Fund said that when oil prices come down, Goodyear will be taking off. He also liked Innospec, the maker of a Diesel-fuel additive, and software producer Sybase.
Standard Life Investments' Steve Weeple saw great opportunities in energy-related stocks like electricity-generators Dynegy and Reliant Resources, and Itron and Comverse, which make devices that measure energy use more precisely.
More disappointing May numbers: The producer-price index went up in line with expectations. Building permits declined, as housing starts fell to a 17-year low. Industrial production slipped. The current-account deficit grew. But Goldman Sachs posted strong quarterly numbers despite the difficult financial environment.
BlackRock's Bob Doll said that what look like bargains among the financials may not be bargains at all, because the Fed's opening of the discount window will bring more regulation and less leverage.
Gerald Jordan of the Jordan Opportunity Fund went with traditional-energy names like Schlumberger and Weatherford International, and in the alternative-energy space, he preferred Chinese solar-energy companies JA Solar Holdings and Yingli Green to wind-energy names.
Craig Hodges of the Hodges Fund said the way to get into financials is through asset managers like US Global Investors. He also endorsed Bristow Group, which operates helicopters that carry oil-rig crews to offshore platforms.
Crude-oil and gasoline supplies continued to shrink, although demand for gasoline also declined. Morgan Stanley posted a 60 percent drop in second-quarter earnings, and FedEx reported a fourth-quarter loss.
Pipeline companies Enterprise Products Partners and Enbridge Energy Partners got thumbs-up from Joseph Keating of RBC Bank.
RDM Financial Group's Ron Weiner found Monsanto positioned to grow because of worldwide demand for more efficiency in food production, and Michael Judd of Greenwich Consultants added Mosaic, Potash and Agrium to that list.
Schwab's Paul Alan Davis picked pharmacy-benefits manager Express Scripts and drugmaker Baxter International, despite Baxter's recent heparin recall.
Two former Bear Stearns executives were arrested on charges stemming from the collapse of the subprime mortgage market. First-time claims for unemployment benefits dipped but remained high. The Philadelphia Fed's factory index showed a June decline, although the Conference Board's Index of Leading Economic Indicators showed a May gain.
Andrew Burkly of Brown Brothers Harriman liked the power of food producers Kellogg, General Mills, and HJ Heinz to pass along increased costs.
Telecom drew the attention of Christopher Larsen of Credit Suisse; he advised investors to stay away from traditional wire-line service providers and to go with wireless companies Sprint Nextel and Leap Wireless International.
Oil rallied on a report hinting at a showdown between Israel and Iran. Moody's cut the ratings of MBIA and Ambac, the two-largest bond insurers. Ford announced it would slash production of small trucks, which have been the backbone of its sales.
Dan Veru of Palisade Capital Management picked Raymond James Financial, regional railway operator Genesee & Wyoming, and promising electric-motor maker Baldor Electric.
Large-cap companies with significant international exposure attracted Gregory Church of Church Capital Management: Procter & Gamble and Cisco. Church also said he liked nuclear-power plant operator Progress Energy.
Scott Billeadeau of Fifth Third Asset Management selected technology developers Nuance Communications and Pros Holding.
And Stuart Frankel's Jeffrey Frankel took a page from the legendary fund manager Peter Lynch, who once famously said, "Never invest in any idea you can't illustrate with a crayon."
After watching The Incredible Hulk, Frankel told CNBC, his children suggested that Marvel Entertainment and Disney would be better investments than financials.