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Markets One Shock Away From a Slide?

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    Delphi Management president Scott Black explains how global markets impact the U.S.

  • Duration 4:32
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The market this week committee -- at various times out of some rough news coming from China the manufacturing sector was the headline yesterday.

Our next guest says things like that show we have a fragile market on our hands and it could be one shock away from some sort of a move to the downside up a little bit today.

Scott Brown yeah.

President -- -- it's always good to have.

Joins us right now to talk about that and it will get to some individual stocks which is really -- -- does it looks companies and tries to pick out some winners -- -- -- the the idea about.

Geo politics -- global economics.

And China are you what camper you in this we always ask people -- -- hard landing soft landing in what effect does that have on us.

Well -- in the soft landing camp.

I wish the United States and seven and a half percent real growth but the problem is every time -- look at China or make -- down the real GDP figure.

People think while it's -- Decrease the demand for things like I and -- our energy.

We'll also it's a natural resources at the margin and -- stocks decline of course the other shock as you're out.

Jim euros on -- Greece has been renegotiated but we still -- there are structural problems.

In Italy Portugal Spain.

And so it doesn't take much to react to the news but if you look at the SMP as a proxy for the market close yesterday slightly on the 14100.

And numbers are around one all four for earnings it's about thirteen point six times.

It's cheap statistically.

But it's getting increasingly difficult to find very good business as a single digit multiples so that's the rub right there.

-- you said -- something recently that I was instinct with regard of that.

And here's the S&P 500 just below 14100 today and up but.

Up a couple points if you were to take apple allowed to talk about apple all the time it seems every single day there's something going on apple today the stock was halted for a bad trade but something's something's going on.

The stocks pretty much gone straight -- take apple allowed in May be.

It it it's distorting things a little bit.

It actually as.

You know the S&P estimates for the year show earnings up about eight point 8% when I did the parents roundtable -- my own model earlier in the year.

Because of the headwinds from the Euro in the declining of cooperate digit operating margin is -- only -- six and a half percent.

But if you strip apples growth out of the S&P you're under 3% growth and earnings for the rest of the S&P for 2012.

That is kind of interesting and just gives people a perspective on where we are and how much individual companies can impact a broader market aren't.

Let me finally ask you about some individual companies -- -- said that's always been your bread and butter and you mentioned a couple here recently Kennametal -- biomedical retail that.

You know people might not have Nestle or heard of KMT and BMR the tickers on the stocks that that you -- In your funds give us the logic for stocks like that that you look at here's the first one down a little today but what's the logic for looking at these.

Companies what kind of metals about a 44 dollar stock it's in June fiscal so -- that -- about four dollar speculative next year 440 -- -- ten.

19% on book with virtually no doubt on the balance -- They still have double digit top line growth which is unusual in the manufacturing sector there be unique position they make cutting tools.

Where they make the disposables that compete against companies like this -- which is potter Berkshire Hathaway and Sean -- which is a sweetened.

But it's it's very well run they have a good book of business for the aerospace defense the auto industry energy -- -- -- -- and they only have minimal exposure last and 20% is UK and Germany -- don't have as much.

Frontal assault on currency issue would have been had 3040 this any of business and the euros -- at this point.

And the other one just real quick by the way on the BMR the biomedical -- show up yes it's actually -- and that's it really don't you start right.

Yeah has a four and a half percent -- -- -- selling at one point 17 times book value.

And the company is growing its top line revenue put about 10% they've built to -- life science buildings parents for companies like Pfizer -- -- -- Cambridge we have in.

In Cambridge and also places northern California.

San Diego.

And it's a growth industry Biotech and in Biopharma types of facilities and very sturdy -- -- -- -- one coverage ratios they get paid while you wait and you got double digit top line -- we covered a lot of macro issues that we don't do a ton of stock picks on the show.

But -- -- -- -- we always try to is a long track record -- this and it's a good insight into.

How people think big money managers about what devices thank you Scott Black as always for.

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