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Drugs may boost market
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July 1, 1998: 1:54 p.m. ET
Analyst says retail sector should benefit from a big run in pharmaceuticals
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NEW YORK (CNNfn) -This is the year turmoil in Asia was expected to take a giant bite out of corporate earnings, but some analysts say strong consumer spending could make this a good year for profits and stock prices if you know where to look.
Alan Bond of Bond Procope Capital Management appeared on CNNfn's "Business Day" Wednesday morning to discuss his picks for investing.
Here's a partial transcript of that discussion.
JOHN METAXAS, CNN ANCHOR: The S&P 500 is up 17 percent so far this year. Can it move much higher than that in the second half?
ALAN BOND, STOCK STRATEGIST, BOND PROCOPE CAPITAL: At the beginning of the year, we thought maybe 20 percent for the year. It has been a very strong first six months. And it looks like we'll have some volatility, but certainly we could see another 10 to 12 percent in the second half.
METAXAS: Ten to 12 percent; that equals almost 30 percent. That would be another gang-busters year.
BOND: This year, much like the last three years -- in the first six months, almost 20 percent in that period of time. As we go into the holidays, you could see some profit taking, but it looks just quite the opposite. Investors still like to want to buy them.
DEBORAH MARCHINI, CNN ANCHOR: Where is the growth coming from? I'm hearing analysts now trimming back their profit forecast for the S&P 500, to something on the order of 1 to 3 percent growth.
BOND: That is actually good. We really want to downplay the expectations, and the fact is that the consumers are spending. You could see that in the performance of the retail sector and the retail stocks in the first six months. We've seen very strong performance, driven by, let's say, a lot of the drugs that have entered the market, particularly within retail, and the retail-oriented drug; companies like CVS Corporation (CVS).
MARCHINI: So then we're going to see basically a community of haves and have-nots out there. Companies that depend predominantly on the U.S. market for their earnings are going to fare very well, while those that depend on exports are going to do poorly.
BOND: I wouldn't lump everybody into that category, but certainly, that's been the trend. And I think that will continue.
METAXAS: So what sectors would you be buying now? Should you buy the retailers, which have had a run-up?
BOND: There are certain retailers that look still very attractive. I mentioned CVS, and it looks very good. Rite-Aid also in that sector. (They have) very strong pharmaceutical sales. It's hard to ignore it. Also companies like Sears (S ) looks quite attractive here, if you're looking for something that trades at a discount to this market.
MARCHINI: Alan, It's interesting that you would play to strengthen pharmaceutical sales by buying the retailers rather than the drug companies.
BOND: Well, the drug stocks have had a very big run. Everybody knows about Pfizer's -- you know, their new drug. It's nice to buy the companies like CVS that are going to benefit from the sales of some of these drugs.
METAXAS: What about some of the beaten-down sectors like the semiconductor stocks, which seem to be hurt by the Asian crisis?
BOND: (They are) volatile; they have been beaten down. Some of them look attractive. For example, something like Intel Corporation (INTC), when it gets below 70, looks very attractive. That was a good trade over the last month or so. I would be very selective within technology. I would probably rotate towards telecom.
MARCHINI: Energy companies are also pretty cheap.
BOND: Energy looks very attractive. They've been cheap all year. I'm not ready to buy them. I just think that the very heavy industrial cyclical stocks still offer a little concern.
METAXAS: When you say telecom, which stocks do you like? Some like Lucent Technologies (LU) have had a big run.
BOND: Lucent has had a big run, but with the AT&T-TCI merger, Lucent is a direct beneficiary. Also, companies like Tellabs (TLAB) (look good). 
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