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Bullish on a long-term basis
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October 27, 1997: 5:21 p.m. ET
Analyst Michael Chung sees silver linings in tech stocks, growth for 'quality'
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NEW YORK (CNNfn) - Monday's Dow plunge has many investors reevaluating their investment strategies. Joining CNNfn anchor Beverly Schuch on "In Play," Michael Chung, equity analyst at Williams Capital Group, offered his advice on the bright side of what might come ahead. A transcript follows.
BEVERLY SCHUCH: You are still bullish on the tech sector, aren't you?
MICHAEL CHUNG: I'm bullish on a long-term basis. I think there are some great companies out there whose fundamentals have not changed overnight, despite what the market's been doing today. Companies like Microsoft (MSFT), Intel (INTC), Cisco (CSCO), 3Com (COMS). These are great, dominant blue chip technology companies that you can just buy cheaper today.
SCHUCH: So Intel (INTL), down to about 75 right now -- do you think that's a good buying opportunity?
CHUNG: I would still wait until the shake-out is over, but if you're a long-term investor, this is a great "buying" opportunity for some high quality names.
SCHUCH: You have to admit, though, you have your work cut out for you. Right now, the Nasdaq is down a stunning 80 points. This is over more than 4, 5 percent of its value!
CHUNG: The Nasdaq is market-capitalization weighted so it's heavily weighted towards companies like Microsoft and Intel. So, a 4-point decline in Microsoft and Intel is a huge impact on the overall Nasdaq. But again, Nasdaq is composed of a lot of high P/E stocks, and today, you just don't want to be in those names.
SCHUCH: Too much money in the markets, in general?
CHUNG: There was a lot of speculation in Asia. A lot of excess, and people are saying that that's true here. Market valuations were at historical highs. This is the third year in a row where we've had 20 percent plus returns in the Dow, S&P and the Nasdaq. I think this is a good breather for the market, and I think it's a good wake-up call for many people who are just chasing names regardless of valuations.
SCHUCH: A number of us were talking last week about the Asian currency crisis. And having asked analysts about it months ago, there didn't seem to be any kind of a reality check that we would be immune from the effects of that. Now it's clear that we're not immune, nor are the other global markets. Just how much could this penetrate our market?
CHUNG: I think there was a huge complacency factor in the market, and the lone voice was Alan Greenspan saying that he was concerned about valuations. The Cinderella scenario of low interest rates and low inflation and strong economic growth. It couldn't last forever and the signs were there that there were problems in the financial markets. And I think Greenspan acknowledges that, but people are just too complacent. If you're up 20-30 percent for the year, you don't want to hear bad news. You want to just own stocks that you own.
SCHUCH: For investors who are invested in Asian mutual funds, what sort of advice do you have for them?
CHUNG: I think Asia is dead money for at least another year. I don't think investor confidence will return for a while. I think there's a huge flight to quality and I think the domestic U.S. market offers some great opportunities. The economy is still strong. Interest rates are low. Inflation is low, relative to the Asian market. And there are some great companies out there, both in the technology sector and also in the cyclical arena, which offer good long-term opportunities.
SCHUCH: So you think there are some silver linings here, and not just for U.S. companies. The bond market, as well?
CHUNG: The bond market is a good opportunity for investors seeking security. I'm still a long-term bull on the stock market.
SCHUCH: Are you changing your allocations -- any recommendations at all?
CHUNG: No. I think if you are a long-term bull, you should increase your equity ratings. There are, again, some great opportunities out there and this is a perfect opportunity to buy one. Everyone else is selling.
SCHUCH: Quickly -- technology is your fancy. What are some of the stocks there that you would be buying?
CHUNG: Again, I would go for quality names. High tech blue chips like the Microsofts, the Intels, companies that dominate their industry.
SCHUCH: All right. Michael Chung, research director at Williams Capital Group, thank you so much. It's always good to hear an upbeat, optimistic voice on a day like today.
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