Like other money managers who analyze stock market cycles, Walt L. Clark, president and CEO of Clark Capital Financial L.L.C. in Columbia, Maryland, has his own method for picking stocks: He classifies companies as either offensive or defensive.
“Offensive stocks do exceptionally well when trends in the economy are moving in the right direction,” Clark explains. “These stocks will give you more growth and appreciation in favorable stock markets.” He says the technology sector is normally classified as offensive.
Defensive stocks “can withstand volatile markets or a barrage of bad news and hold up relatively well in uncertain times.” The energy, gold, and pharmaceutical sectors fit into the defensive category, says Clark.
Clark Capital is an institutional and retail financial services firm that employs an overall conservative approach to investing. It manages more than $42 million in assets and provides financial and estate planning, private money management, and pension fund management services, among others. Says Clark, “Our objective is to preserve clients’ money in negative markets and increase their cash in favorable markets.”
Amgen Inc. (Nasdaq: AMGN) is a company Clark puts in the defensive category. It develops and manufactures drugs and other medical treatments. Epogen, a drug used in the treatment of dialysis patients, is among Amgen’s more popular products. “They are a world leader in drug development and have tremendous market share,” says Clark. “As they continue to grow their research and development division, they will be innovators in their field.”
J.P. Morgan Chase & Co. (NYSE: JPM), another of Clark’s defensive picks, has an international network that enhances its market share and earnings potential. The full-banking institution has already increased market share in New York, Texas, and Illinois. A new management team, added through acquisitions, makes the firm stronger. Says Clark, “[The new management team], coupled with the present management team, will bring greater accountability and cost consciousness to the company.”
Clark also targets SINA Corp. (Nasdaq: SINA), a Chinese online media company that provides a variety of services. Clark classifies SINA as an offensive stock because it generates
business from subscriptions and advertisements — areas that flourish when the economy is thriving. “SINA is to China what Yahoo! is to the U.S.,” says Clark. “They currently have more than 66 million registered users, but China has over 1 billion people. [SINA] will continue to register new users and increase their market share, which will lead to greater growth and profits.”Another Internet company Clark likes is eBay Inc. (Nasdaq: eBay), which operates an online marketplace where all types of products and collectibles are sold. Clark says the company is now the established industry leader: “eBay has proven that it’s a defensive stock. They did very well, even in the worst of times. They are able to generate a tremendous amount of cash flow from the business, and they have pushed their services [overseas], which helps increase their global market share.”
Clark’s final selection, Tyco International Ltd. (NYSE: TYC), manufactures products and provides services for the security, electronics, and healthcare industries. Money managers have called the company “Baby GE” because, like the corporate giant, Tyco is building itself up through acquisitions. Tyco’s new management team is refocusing the company on its core business. Clark says, “They have introduced a new round of cost-cutting measures and, despite the recent scandals, the company is currently being run exceptionally well.”
Walt L. Clark’s Private Screening Picks
|
Company |
Price * |
12-to-18-Month |
P/E on Projected |
Est. 5-Yr. |
Why Stock Will Outperform |
| Amgen Inc. Nasdaq: AMGN |
$58.30 | $ 75.00 | 20.6 | 21.0% | Amgen is a world leader in drug development and has plans to expand its R&D division. The company also has excellent market share. |
| JPMorgan Chase NYSE: JPM |
41.15 | 55.00 | 11.5 | 11.0 | JPMorgan Chase continues to increase market share by acquiring large shares of the retail banking market. |
| SINA Corp Nasdaq: SINA |
41.19 | 60.00 | 23.8 | 40.0 | SINA should continue to increase its customer base as it taps into China’s population of more than 1 billion. |
| eBay Inc. Nasdaq: eBay |
75.94 | 100.00 | 50.9 | 38.0 | eBay has few overhead costs and its service is growing in Europe and Asia. |
| Tyco Int’l. Ltd. NYSE: TYC |
28.69 | 40.00 | 15.8 | 16.0 | Tyco’s new management team is implementing cost-cutting measures and refocusing on its core business. |
| Source: Clark Capital Financial L.L.C.; Yahoo! Finance; Morningstar.com | |||||