Market Monitor: Rally Will Continue for Next 12 Months

Erik Ristuben, chief investment strategist at Russell Investments, talks to NBR about the markets and answers viewer questions about stocks.

I would like your analysis of Boeing. The company has unprecedented backlog, costs seem controlled, future products are in demand and U.S. carriers have aging fleets.
-Robert B., Long Beach, Calif.

RISTUBEN: We`re underweight Boeing (NYSE:BA). So, why are — why don`t we hold as much of Boeing (NYSE:BA) as people would think we might?

The basic reason is relative valuation of Boeing versus other stocks that you can buy. Boeing (NYSE:BA), even with today`s 5 percent pull back, which you noted earlier in the broadcast, it`s still up 35 percent year-to-date. It`s actually had a very good one-year return.

We think that it`s a good stock, good company, just a little pricey at this level.

Saw your program for the first time tonight … new to the market. Bought Sony in December 2012 at $12 per share, now it’s over $21. Sell or hold on?
-Linda C.

RISTUBEN: Well, that`s another stock that we`re underweight and we`re actually meaningful underweight. She may want to consider actually a company like Samsung.

I mean, Sony (NYSE:SNE), it`s another story. Their stock price recently has been spectacular. They have benefited probably in no small part in the consumer electronics industry from being in Japan where Samsung`s market in Korea has not done as well and their stock hasn`t done as well.

We think Samsung is a better value than Sony (NYSE:SNE).

I enjoy your show each week night and find it very informative. Can you please look at Seadrill, ticker symbol SDRL, and tell me about what the future looks like for the company and its dividend.
-Matt H., Missouri

RISTUBEN: Let`s tell viewers that they are an offshore drilling contractor. So they own oil rigs and they drill off those oil rigs. Then, now, what you see is businesses has been very good for them since oil prices have been relatively higher over the last five years.

In response to that, what they`ve done is they`ve actually taken out a lot of debt because oil rigs are expensive and significantly increased their capacity, which isn`t necessarily a problem on its own. The problem is, the industry as a whole has done that.

So, we think that industry is going to come under price pressure in the future because so much new capacity is going to come online. The other problem is debt that they have taken on. It`s going to be hard to refinance lower interest rates. Interest rates are likely to move higher.

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