investingfromtheright

I am retired and take educated guesses on all things financial.

March 02, 2007

March 2, 2007: How CSFB views the markets


I have great respect for the worldwide research team put together by CSFB. With so many top notch analysts going for the big money in hedge fund positions, Credit Suisse First Boston has maintained loyal and talented staff, IMO.


CSFB stands by their 2007 forecast of 1,500 S&P and 430 DJ EuroStoxx for 2007.

Valuations are attractive, especially relative to other financial classes.

The macro environment is still very supportive. 2/3 of the rise in earnings has been structural.

Consensus that the recent fluctuations are "not May 2006". Recommend buying quality growth stocks. European capital goods stocks look rich.

Two thirds of the improvement in Return on Equity is caused by sustainable factors.

Five main positives about the global market strategy:
1. Inflation is less of a problem
2. Lead indicators are stabilising in the US.
3. Global policy on rates is loose. Real rates globally are just 2%
4. Global growth is very broadly based. Excessive growth of fixed income investments and housing investment growth has been corrected (I'LL SAY...!). China alone will grow at at least 10% per year for the next several years to create 15 million jobs, accommodating rural and urban migration.
5. Corporations appear not to be repeating the mistakes of previous cycles (borrowing too much and over-investing). Corporate balance sheets are in excellent shape.

CSFB's tactical indicators are better than May 2006.

CSFB's main over weights for the next six months are life insurance companies, banks in Europe and GEM, technology globally. mining, plays on the emerging market consumer, and a small overweight of integrated oil and US Telecoms. Buy best of breed, CSFB states.

If an investor wishes to be defensive, CSFB recommends consideration of SAB Miller, Inbev, Veolia, Tesco,Roche, Quinetiq, Avon, Estee Lauder, AIG, United Health and Gilead Science.

If one is looking for valued growth, CSFB recommends BMW, RR. KBC,SAN,ING,Allianz, Hikma,Pearson, Kazakmys, SGS, Ericsson, Sage, Omnicorn, Disney, Texas Instruments, Harley Davidson and Microsoft.

The emerging markets that may be most vulnerable to a current account deficit include the Baltic States, Hungary and Turkey.

CSFB states that into the recent weakness in commodity prices is expected to be short lived due to continued need in the emerging markets, especially Frontier markets and China.

I do not agree with some of CSFB stock selections, but I have noted with interest their excellent track record of analysis regarding the big picture. And the big picture looks good. Very good.

Links to this post:

Create a Link

<< Home