CNBC: A combination of interest rate concerns and warnings by certain
companies with slower earnings resulted in a big down day on Wall Street.
Our next guest sees those earnings as an important market mover during this
volatile season. Joining us today from San Francisco is Michael Moe, the
Global Growth Stock Research Director at Merrill Lynch. Good to see you,
Michael.
Moe: Nice to see you.
CNBC: What do you make of the round-trip that we almost made in the
NASDAQ today, and also the volatility that we saw in the stock market? A lot
of people thought some of this was behind us.
Moe: Well, I think volatility is going to be with us for the
foreseeable future. Little bits of information seem to have a dramatic
impact on the direction of stocks. But really volatility is a friend of the
long-term growth investor because it does create buying opportunities for
names where the fundamentals are very robust, where we get within 20, 25
percent moves in a stock in a day. That obviously creates opportunities to
be selective.
CNBC: If I wanted to find some growth stocks that also offer at least
a modicum of safety, where should I look?
Moe: The new, new thing is really the old, old thing, which is
earnings growth. Companies that actually generate cash flow and earnings are
back in vogue.
CNBC:No…. That’s an amazing thought.
Moe: It’s an amazing concept, but the fact of the matter is there are
a number of companies that are doing very, very well, generating cash flow
and earnings and have very strong business models.
CNBC: Name a couple.
Moe: A company we like a lot is TMP Worldwide, which has the Monster
Board. Human capital solutions-obtaining, training, retaining employees-is
absolutely crucial in the knowledge economy. TMP is a phenomenal company.
They reported numbers yesterday, with very, very strong Internet numbers.
Monster board is the category killer in the Internet resume marketplace. The
company just is very, very strong.
CNBC: What would you avoid? Because we’ve seen a lot of the previous
high fliers really beaten down, and they look pretty tempting.
Moe: Well, what we’ve seen is a tremendous bifurcation with
previously high-flying growth names. Names that I think are particularly
dangerous at this point are the ones without enough capital or cash to get
to profitability. There was sort of a foregone assumption that there would
be plenty of capital available for companies as long as they showed positive
revenue growth. I don’t think we’re in that type of market anymore. Without
clear visibility and path to profitability, I think a number of these
companies do have some issues in front of them.
CNBC: Michael, good to see you, thanks so much.
Moe: Thank you.
CNBC: We have been speaking with Michael Moe, Global Growth Stock
Research Director at Merrill Lynch.
