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Back in December my next guest -- Procter & Gamble as one of his top picks up the stock is up.
More than 11%.
Since that day hitting another all time high yesterday but he also like some other plays that others may not be so excited about that might you.
Sort of a contrary -- approach Christmas.
Is global financial private capital chief investment officer always with -- smiled -- to -- had to be here for you -- -- out of the park with with Procter & Gamble.
One might argue that OK the market has done extraordinarily well in that exact same time so let's force you to do another trick here when it comes to stock picking.
-- say love what others hate talk about that thinking.
Absolutely first is I think that what you should do was think like a private equity manager they love to look at what is -- -- us so.
Which you wanna do was look at two sectors I think one is defense because everybody's panicked out of that nobody made any money by panic.
And it is absolutely -- single digit PEs go back to the 1990s remember we had the peace dividend and all of a sudden people said solid defence stocks.
And then lo and -- for the next three or four years they were the best performing sector that was consolidation that was downsizing was restructuring.
I think you'll see that.
Here are the defense picks this look like every defense company in America thank you what -- just a bit less than everything else but looking at general dynamics that's down 4% year over year rate -- about 7% of the great.
Lockheed is flat that's your favorite.
-- market Lockheed is a better than 5% dividend.
Selling net eight times earnings and if you know any sequester what gets hurt the individual infrastructures you know the laundromat -- -- fast food enterprises it's not the defense companies they'll find their sales.
Give me sales and we can find profit listen.
What you just said just a few seconds ago nobody ever made money from panic.
So that I think is of really good not good for people to take with them now people are also panic and out of the PC makers because they -- Everybody's going tablets and nobody's going PC makers -- some pretty good arguments Kress well.
You know absolutely the buggy -- side of the PC business is going to outperform the apple economy.
This year and it's already started to do that take a look at Hewlett-Packard Western Digital -- down 40% was the worst performer on the Dow last year right and now's the time to go into it I.
Really believe that anyone who's seen the action in General Electric or lines or anything like that we'll see that Meg Whitman maybe not in the next two quarters or so but eventually.
They over the next year will restructure and change the nature of that company so that's a unit also you've established that you pick undervalued or Freddie cat.
Areas like PCs and defense.
What else do you look for when -- picking stocks to -- into those particular routes but the most important thing -- top line growth anybody can engineer profits the second thing -- you want companies that are free cash flow positive.
And you want companies that have.
Basically low -- and the reason is is that I think it's time for companies to re lever themselves particularly in the industrial area of the stocks like.
Dover and Emerson where you can really.
Do quite a job of tearing them apart.
Tearing them apart -- let's go back to Procter & Gamble because right now you're saying you don't like consumer oriented stocks.
Isn't that a consumer oriented well it is consumer Staples maybe a little bit more tied -- to -- is no different than enough.
Something that would be clothing is up 20% your -- by the way.
And the reason is that I think the debt cliff means that it's like people having -- Pay a dollar more for gasoline so what are they gonna do they're not gonna go to the restaurants and aren't gonna go to the retailers.
For clothing or whatever food whatever the case might be entertainment.
Probably less -- eventually -- adjust but right now stay -- just quickly get your comment on Western Digital which is actually within your PC.
Group of picks up what digital was hit badly about a year ago by flooding in -- Right that's -- old story but they are one of the few companies that does hard drives.
Correct is that all a part of what you love about them having this -- what are those Warren Buffett boat.
Kind of companies that are kind of best in class and not right and the hard drive businesses here to stay no question SanDisk eventually take over with solid state drives but.
Hard drives are here to stay -- you think of all the people in the world like.
I'll occupy -- well I think you can offset it by buying SanDisk -- -- a growth story Western Digital is a dividend story.
Very cheap Tom Watson cash flow.
And they could reduce the -- easily.
Great to have you thank you very much thank you -- fertile -- okay act out.
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