Market Monitor: Expect 5 Percent Pullback

Phil Orlando, chief equity strategist at Federated Investors, answers viewer investment questions, and tells NBR which names are on his “buy” list.

GHARIB: We got lots of questions for you from viewers. So, let`s get right to it.

We have Gary who wants to know about the outlook for Halliburton (NYSE:HAL). You heard our story earlier in the program about its settling all of those BP spill issues.

ORLANDO: And that overhang now is behind the company. That allows them to focus in underlying fundamentals, which are pretty strong. They`re going to do a significant buyback program.

So, we like Halliburton (NYSE:HAL). Here in mid-40s, you could see the stock move up to the mid-50s over the course of the next year or so.

MATHISEN: Let`s move to Dave in Ohio. He wants to know whether Target (NYSE:TGT) is a good one to own. What do you think, Phil?

ORLANDO: We do like Target (NYSE:TGT) but retailers are under pressure right now. And you talked about some of this at the beginning of the show. The increase in taxes, the sequester has hurt consumer spending.

We do think that`s going to improve in the second half of the year, if Target (NYSE:TGT) comes in here into the high 60s or so, I think it`s attractive for a rebound to consumer spending in the second half of the year.

GHARIB: All right. And another sector, fertilizer supplier Potash. Loren in North Dakota, wants to know about the outlook for this company. What`s your view on this, POT?

ORLANDO: It`s a great fundamental story that`s under a lot of pressure right now for a number of reasons. You`ve got a normal growing cycle in the United States, so the prices of corn and wheat for example are sitting at 52-week lows. The emerging markets customers this company sells to, China, Brazil, et cetera, right now, are weak from an economic standpoint. You`ve got a strong dollar that`s creating some currency headwinds.

So, right now, the numbers are a mess. Longer term, the stock is still attractive but near term. It`s probably not where you want to be.

MATHISEN: All right. Let`s move to Jim in San Jose. He says he`s owned Microsoft (NASDAQ:MSFT) for a couple years now and he`s wondering whether he should stick with it.

What do you think, Phil?

ORLANDO: Well, you`ve got to have a lot of patience. They pushed the quarter within the last week or so. The stocks down about 15 percent.

The problem is that the company is still — its core business is still the PC or tied to the PC, and that`s an area that`s in decline. The areas that are hot right now are mobile, smartphones, things of that measure. So what you want to see is some sort of a major transition or reorganization, maybe even some sort of change in senior management. We got to get Microsoft (NASDAQ:MSFT) focused on areas that are growing rather than areas that are in decline.

GHARIB: So, Phil, two stock recommendations of your own and we want to hear about them.

Gilead Sciences (NASDAQ:GILD), you have. Tell us what`s so attractive about GILD.

ORLANDO: Biotechnology company, they are active in the hepatitis C market. What occurred just within the last 24 hours, which is very exciting, is one of the companies that they have become competing against in terms of developing this drug to come to the market, they have some liver related issues and the FDA has held them up. That clears the way for Gilead to come to market probably by the end of year and being the only major company with a drug in this market. That can give them to a two to three year head start to really develop a strong foothold.

Stock here at about 60 and we could very easily see that in the mid-70s looking out over the next 12 to 18 months.

MATHISEN: And your other pick, we got about 30 seconds, Phil, is Qualcomm (NASDAQ:QCOM). And if you would conclude by letting us know whether you own any of these stocks, that we just talked about?

ORLANDO: We actually do own both Qualcomm (NASDAQ:QCOM) and Gilead, like blow the quarter out. Qualcomm (NASDAQ:QCOM) did the other day. They guided higher. Unlike Microsoft (NASDAQ:MSFT), they are in the smartphone business, which is growing, and this company, we think, is in position to continue to do very well over the next couple of years.

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