Howard Ward, chief investment officer of growth and equities at Gabelli Funds, answered NBR viewer questions on stocks.
As a former employee and Micron Technology loyalist, I am interested in why MU has a six month run up from the $6 range to $13. Investors might like to know what is driving this stock.
– Wayne, Texas
Ward: Well, you know, this is one of the leading domestic producers of memory chips, which is very much a commodity-like business, but there`s some — some suppliers have fallen out of that business in recent years.
Business is good. Micron reported a very good quarter, a little over a week ago. Good top line, good bottom line, good margins. So, that`s the good news.
The bad news is, this stock more than doubled so far this year. It`s a notoriously volatile business. I would really take my cue here from the insiders and the insiders I`m afraid have been selling. There was a flurry of selling around $10 a share in April, another flurry of selling in early June, that $12 and $13 a share. Stock’s now $14 a share.
I`d rather be a seller and take my chips off the table here.
True luxury stocks, like Tiffany—stocks with gross margins in the 60 percent to 70 percent range and net profits in the 20 percent range that don’t discount their goods.
– Nick, California
Ward: Well, Tiffany really is one of the true jewels, so to speak, in luxury retailing business and consumer net worth has recovered to pre-recession levels, and the high-end consumer is back, both here as well as in Japan. We saw that in the first quarter numbers for Tiffany (NYSE:TIF), which were very good.
I have an $82 price target, which would be about 12 times earnings.
I`m a long-time owner of Tiffany. I think it`s a great long- term investment for people.
I would like to hear about a stock related to a positive area of the economy—USG for housing.
– Brian F.
Ward: They make Gypsum wall board and other housing materials for building. This company has actually been through bankruptcy twice in the last 25 years. It`s had a lot of litigation associated with it in the past. That gives me a reason to hesitate to recommend it.
But and this is a big but. Berkshire Hathaway owns 15 percent of this company. They made that investment in 2000. I don`t know if they`re going to buy anymore or not. But that`s a pretty good endorsement for some pretty savvy investors. They undoubtedly know this company better than I do. There are cleaner ways to play housing however. Homebuilder stocks like Lennar.
Tyler Mathisen: [Priceline] was trading at about $813 share when you mentioned it in May. Now, it`s $825. Do you still like it?
Ward: Yes, convection for price line has grown greater as consumer confidence continues to rise now to a five-year high. So, this company could sell at 25 times earnings by the end of the year. That will give you a stock price around $1,000.
So, mid-20 percent growth and 25 times earnings would be quite appropriate. I think it`s full steam ahead for Priceline.