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PAUL KANGAS: My guest "Market Monitor" this week is Eugene Peroni, senior vice president of equity research for Advisors Asset Management, based in Philadelphia. Welcome back to NIGHTLY BUSINESS REPORT, Gene. EUGENE PERONI, JR., SR. VP OF EQUITY RESEARCH, ADVISORS ASSET MGMT.: Thank you, Paul. Nice to be back.
KANGAS: Now you, specialize in technical market analysis. So is this stock market in big trouble judging from its performance this week?
PERONI: I don't think that it's in big trouble. I think we're just having more of these gyrations caused by a number of factors, certainly the financial concerns. The uncertainty is what the Fed will do next, seasonal, cyclical factors as well and really a division in leadership with the financials and home builders on the one side and natural resources and infrastructure and other positive areas on the other.
KANGAS: We've now broken below some important support levels, have we not?
PERONI: I don't think we've broken below any really important support levels, certainly 12,000 is a bit of a psychological level, but we're still holding above the January and March lows with today's closing. We might retest that maybe move a little bit below there. But I think we're getting close to a trading bottom.
KANGAS: But you don't see a major capitulation by Wall Street's bulls?
PERONI: I don't, not at this stage, no. I think that the leadership is pretty much identified. I think it's causing a division in the leadership, two-tiered market environment. But I don't see a capitulation at this stage, no.
KANGAS: What is the downside potential for the blue chip Dow Industrial Average?
PERONI: Well, possibly it could get down into the lower 11,000s, but I suspect if it did so, it would be a very sharp and short-lived event, maybe event driven actually. Moreover, I think we're pretty close to the lows versus what the upside potential for the Dow is looking longer term.
KANGAS: So what strategy are you employing in this rather negative environment?
PERONI: Well, we think it's important to be stock-picking focused at this stage and certainly pay attention to the sectors that are performing best, not only in terms of market performance but in terms of consistent earnings growth trends.
KANGAS: Now on your last visit with us in mid-December, you gave our viewers four stock recommendations. Let's see how they've done since then. Dolby Labs (DLB) was one of them, down 8.6 percent, but more than making up for that was Flowserve Corp (FLS), up nearly 34 percent. Are you still with these two?
PERONI: Yes both I would stay with for the long term.
KANGAS: OK, let's have a look at the other two you recommended and they are both on the down side, Jacob (JEC) by 8.4, MEMC Electronic (WFR) down nearly 25 percent. Stay with them?
PERONI: We continue to hold both of these stocks, yes.
KANGAS: OK. Let's have some new recommendations if you will.
PERONI: Sure. Our first choice is Core Labs (CLB) involved in the oil and gas service related area.
KANGAS: CLB on the big board, right?
PERONI: That's correct. Next we have Itron (ITRI).
KANGAS: Let's have a look at Itron, trading symbol ITRI. Tell us about that one.
PERONI: This company is involved in remote meter. They have systems to analyze water usage, electric usage, gas usage and so on. So it's utility driven, but I think that it's a good opportunity to play the water area and the energy area, as well.
KANGAS: I understand you still like Monsanto as these levels. It's had quite a run-up in the last year. That's MON on the big board. Why do you like it here at this elevated price?
PERONI: Well, I think agriculture is here to stay for a while as a leadership area in the market and surely it has had a big move. The group has had a big move. But there have been very good earnings trends to back up these moves and we continue to see analysts on Wall Street raising their estimates. So Wall Street has not yet quantified in my opinion the full potential for this group and for his stock.
KANGAS: We only have about 35 seconds left. On final pick and what's the ticker symbol?
PERONI: Steel Dynamics. The symbol is STLD, involved in the steel business, rolled steel and so on. We like this group very much, as well.
KANGAS: So you're doing it sector by sector. That's obvious.
PERONI: We are.
KANGAS: I'm just going to ask you if you personally own any of the stocks mentioned or have other disclosures to make?
PERONI: I own unit investment trust but do hold these stocks.
KANGAS: All of them that we've mentioned?
PERONI: Yes.
KANGAS: OK, gene, thanks for sharing your insights with us once again PERONI: Thank you, Paul, my pleasure.
KANGAS: My guest, Eugene Peroni of Advisors Asset Management.