Tech and Bank Stocks — Earnings Season's Dominant Themes
There are two themes so far in this earnings season: Very good results from the technology sector; and huge variability in banks' results along with the "high volumes of writeoffs," noted Bob Parker, vice chairman at Credit Suisse Asset Management.
There have been good results from IT giants IBM and Intel and we should expect further positive news, he said.
Parker told CNBC that Credit Suisse has been long the tech sector since last March and will maintain that position, as it is "a sector which has many attractions, notably it's a play on the economic recovery."
"Most IT companies [have] very low levels of debt, very strong free-cash flows. They fit very much into what we call our 'high quality index,'" he said.
Valuations in the sector are not stretched, he added.
For financial firms, there has been a "huge variability" in the results. But Parker said that if you cut through that variability, an underlying aspect — which investors may have ignored — is that there are still high volumes of writeoffs.
As 2010 progresses, the U.S. banks' credit card writeoffs, along with the UK banks' continued high levels of commercial real-estate writeoffs, will be "a dead weight on earnings going forward," he predicted.
For the year, Credit Suisse is maintaining its forecast of 2010 global earnings being up, on average, 20 percent, Parker said.
The positive earnings momentum in the second half of 2009 will "certainly" go forward for the first half of this year, if not the whole of the year, he said, adding that corporate earnings growth formed a base in the second quarter of 2009.
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Disclosure information was not available for Parker or his company.