A Cautious First Step

market, you need to have some exposure to Wall Street. And I don’t think there’s any company run better than Goldman Sachs.

You want to talk about blowing away earnings estimates, the Street was looking for it to post first quarter revenues of $10.69 billion, and they generated $12.73 billion. Wall Street thought they were going to earn $4.90 per share, and they earned $6.67 per share. They also bought back millions of their own shares at an average of $207 a share, so here’s a company that’s putting its money where its mouth is.

And there’s also a railroad among your picks?
I’ve liked the rails for the last three or four years. It’s an industry that reflects the U.S. economy. I currently like CSX Corp. (CSX). The U.S. economy is slowing, but it is still incredibly strong. Imports have to be brought in and for the most part they are moved by trains.

There’s a strong demand for U.S. commodities. That’s one of the things that’s been going up–steel, coal, timber–and I think that demand is going to continue. When it comes to shipping in this country, truckers have a big problem. They have capacity constraints. There’s just so many that they can fit on the highways and they have a lot more regulatory hassles. If you believe the economy is good, and it’s going to stay relatively strong, then this is a real good play.

Tell me about Weatherford International Ltd. (WFT)
This is an oil drilling and services play. For all the talk of alternative fuels, it’s going to be a long, long, time before we really ever get off of fossil fuels. The thing is that if it’s a fact of life, and it is, then I think investors should have some type of exposure to it.

For Exxon Mobil and those companies where you go to fill up, they’re going to do well–but what’s really going to do well are the companies that service and sell the equipment. Even if crude oil is $100 a barrel, you have to be able to get to it. [Weatherford] is a very well-run company; the stock’s pulled back a little bit recently, which to me makes it even more attractive. I think it’s a good play if you believe that over the next five years crude oil will be higher rather than lower.

How sensitive is Weatherford to a sharp decline in oil prices?
There are some “magic numbers.” Fifty dollars a barrel is sort of a time where the companies start to pull things back a little bit, but I believe $40 a barrel is the real number. For the most part, most oil companies use $40 in their model when they figure out what they’re going to earn, so they’ve built in a fair amount of cushion.