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Saturday, September 18, 2010

Elaine Garzarelli Bullish - 1300 S&P500 Target

Elaine Garzarelli, President, Garzarelli Capital was the Friday Market Monitor guest on "Nightly Business Report."

Elaine was quite bullish with an S&P500 target of 1300 based on 2011 earnings. Below are excerpts from her interview with PBS host Tom Hudson.

HUDSON: In February, you were saying the winter swoon was over and we did see prices climb through April and since then we`ve seen some volatility. What makes you think that higher stock prices are coming?

"GARZARELLI: Well, we`ve been in a trading range for five or six months. Usually after the initial surge in a new bull market -- the market went up 70 percent for the S&P 500 after a recession -- the usual case is that the stock market goes into a trading range for six to 12 months. So that is normal. And every time that happens, there is talk about double dips. And I don`t see a double dip, therefore I think we`re going to come out of this trading range, which has been 1050 to 1150 for five or six months.

HUDSON: OK. So how high and how fast do you think this rally could come?

GARZARELLI: Well, my indicators have gone up from 67 percent to 82 percent which is quite bullish. The 100 percent is the maximum, so 82 percent is fairly good. Thirty percent would be a new bear market. I have earnings for 2011 at 86. The consensus now is at 95. So I`m way below the consensus and with the P/E normal of about 15, that gets us to 1300 on the S&P 500. What`s that, 15 percent?"

HUDSON: A very bullish move, yeah.

GARZARELLI: That is only based on `11, not based on 2012 earnings.

HUDSON: Now you were here back in February as I mentioned and at the time, you were looking for dividend plays, including a couple of high-yield junk bond ETFs, which are up about 2 percent and that does not include any dividends. Do you still like this area?

GARZARELLI: Absolutely. I love junk bonds.

Garzarelli recommended the Industrial Select Sector SPDR XLI, the Home builder SPDR XHB and the Technology Select Sector SPDR XLK.

HUDSON: Would you rather buy the XHB than a new home?

GARZARELLI: Yes.

HUDSON: OK, any disclosures for these funds?

GARZARELLI: I own everything I`ve mentioned tonight in my sector analysis fund.


IndexSept 17, 2010YTD %
DJIA10,607.851.7
Nasdaq2,315.612.0
S&P 5001,125.590.9
 YTD does not include dividends.

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