When is a value play actually a value trap? We asked Ted Parrish, principal at The Henssler Financial Group, which has some $1.3 billion at work. Parrish goes way, way off the beaten path with his stock picks, expressing confidence in Dow components General Electric (GE), Cisco (CSCO) and Disney (DIS).
As stock momentum is clearly not a criteria, at least for GE and Cisco, we asked Parrish how long he can stay a stock before throwing in the towel. Parrish sees GE's corporate business reviving along with the rest of the industrial space. He's also confident in the leadership of CEO Jeff Immelt, who has been widely criticized of late.
"It's not [Immelt's] fault" that GE's stock is down 60% over the last decade, says Parrish. What would make the fund manager more confident in GE? Better visibility on GE's financial division, which went from the star to the black sheep of the corporate giant in the wake of the financial crisis.
Parrish is more circumspect about Cisco, particularly CEO John Chambers. The fund manager says Chambers is "part of the problem," both for the stock and the execution. For that reason, Parrish is apt to keep Cisco on a tighter leash if performance continues to drag, particularly with Cisco the "backbone of the Internet" and seemingly perfectly positioned to ride the wave.
Finally we got to a Dow company that is actually delivering results for shareholders. Entertainment king and Macke core holding Disney is near all-time highs and Parrish sees no reason to kick it out of the portfolio. Citing the utterly dominant position of ESPN, continuing strong entertainment divisions and, of course, theme parks, Parrish convincingly talked my book on the Mouse House. When asked if a soft consumer could hurt performance in the park division, Parrish takes an opposite approach, noting the relative value of a vacation to the parks vs. a family trip involving multiple destinations or a trip abroad.
I'd like to see the Mouse House have the pricing power to gouge park visitors and improve margins. Time will tell if General Electric and Cisco perform as well. We invite you to take your position and tell us what you think both in the comment section below or via email at BreakoutCrew@Yahoo.com.