It may have been self evident to the signers of the Declaration of Independence that all men are created equal, but when it comes to stocks, no such notion of equality exists. Because of this, investment professionals like Charlie Smith, chief investment officer at Fort Pitt Capital, are able to simultaneously be unmoved by the market yet also quite passionate about particular stocks.
As he discusses in the attached video, when it comes to the S&P 500 (SPY) as a whole, he's not that excited right now. He's neutral on the large cap index and says it's fairly valued in the 1,500 to 1,550 range, exactly where it is right now.
But if you ask him about General Electric (GE), a large and dominate component of that same index, you'll hear an entirely different story. "I think the story on GE is really all about the acquisitions they've made in the energy realm," he says, particularly in deepwater drilling and pumping equipment used for fracking. While this Dow Jones Industrial Average stalwart is still trading at less than half of its peak price, Smith says he isn't in it for a ride back to $60, but rather a clean 10-15% total return move back to the $28-$32 range.
For the more aggressively minded, Smith also is recommending shares of SanDisk (SNDK) here, based on his observation of a seasonal anomaly in the flash memory category it dominates. "Typically you see seasonal weakness for flash from the period after Christmas until about now," he says. But this year, supply and pricing for flash memory are both up, and he says that will be good for sales, earnings and margins at SanDisk for a couple of quarters and could propel the stock to $70.
Lastly, Smith has stirred up a cocktail of sorts that is a play on cheap natural gas and the ongoing recovery in real estate. The company, Axiall (AXLL) was born of the January combination of the old PPG Chemical business and Georgia Gulf. "This is really a combo of two themes: low feedstock costs (particularly Nat gas) and the housing market starting to improve," Smith says of this maker of vinyl building products and materials. He thinks shares of this $2 billion Atlanta-based company could go to $70 thanks to those twin tailwinds and some very good cash flow.
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