Theodore L. Parrish is confident the U.S. economy is headed for a robust turnaround in the next 18 months. Not only does the money manager believe the recovery is real, he thinks it will be sustainable since companies are more likely to spend on improvements in infrastructure. He sees other positive signs such as continued consumer spending and a strong housing market. Against this backdrop, he is looking at sectors that have waned in recent years but which have upside long-term growth potential.
Parrish wears two hats. As principal and director of investments at Marietta, Georgia-based G.W. Henssler & Associates Ltd., he manages research and trading activities. As co-portfolio manager of the $88 million Henssler Equity Fund, he has the hands-on job of picking stocks that will yield profits.
The first stage of the stock selection process is reviewing ratings computed by Value Line, a firm that provides investment research on stocks, mutual funds, options, and convertibles. “We only buy companies that have an A rating or better for financial strength or companies that have an A- or better for S&P earnings and dividend quality strength,” explains Parrish. “Next, I screen by volume. We only buy companies that trade 150,000 shares a day.”
Parrish is looking particularly to the healthcare, technology, and financial
services sectors. Two of his health-related top picks are prescription drug maker Pfizer Inc. (NYSE: PFE) and Cardinal Health Inc. (NYSE: CAH), which provides pharmaceutical and other healthcare products and distribution services.Parrish believes Pfizer will continue to generate tremendous revenue with healthcare spending on the rise; fears regarding patent expiration and talk of competition from generic drugs are being overblown. “This company has some of the most popular drugs available … drugs that earn the company billions of dollars per year,” he explains. Parrish likes Cardinal Health because “it’s well run. They have good margins, low cost structure, and a strong cash flow, and they will benefit from an increase in prescription drug use.”
On the financial front, Parrish likes American International Group Inc. (NYSE: AIG), which provides life insurance, financial services, and retirement saving and asset management. “Companies like American International are in a great position because they are in a favorable underwriting cycle. They have pricing power. Premiums have been up for the past year or two, since 9-11,” he adds.
One technology company Parrish is banking on is Affiliated Computer Services Inc. (NYSE: ACS), which provides business process and information technology, outsourcing solutions, and systems integration services to corporate and government clients. Local and state government work made up 41% of
the company’s fiscal revenues in 2002, and federal government work accounted for another 26%. “As the government continues to cut costs and streamline operations, Affiliated Computer Systems will continue to receive government contracts,” Parrish says.He also likes beverage and snack food manufacturer PepsiCo Inc. (NYSE: PEP). Popular items such as Lay’s Potato Chips, Doritos, Cheetos, as well as Tropicana Pure Premium Orange Juice, Pepsi Cola, and Quaker Oatmeal are items that have dominated the market. “(PepsiCo) is a diversified company that knows how to make money.”
Theodore L. Parrish
Private Screening Picks
| Company Exchange: Symbol |
Price* | 12- to 18-Month Price Target |
P/E on Projected 2003 Earnings |
Est. 5-Yr. Annual EPS Growth Rate |
Why Stock Will Outperform |
| Pfizer Inc NYSE: PFE |
$30.53 | $44.00 | 17.8 | 13.6% | Healthcare spending is on the rise. Products will remain popular. |
| Cardinal Health Inc NYSE: CAH |
57.90 | 68.00 | 15.9 | 18.3 | Company will benefit from increased prescription drug use; has low cost structure, strong cash flow. |
| American Intl Group Inc NYSE: AIG |
58.00 | 70.00 | 15.7 | 14.1 | Stock will benefit from higher premiums. |
| Â | Â | Â | Â | Â | Â |
| Affiliated Computer Serv Inc NYSE: ACS |
49.99 | 62.00 | 18.6 | 20.2 | Local, state, and federal government business and commercial outsourcing business is growing. |
| PepsiCo Inc NYSE: PEP |
45.51 | 60.00 | 21.5 | 11.8 | They have popular products that will continue to dominate the market. |
*AS OF SEPT. 25, 2003 SOURCE: THEODORE L. PARRISH; WWW.MORNINGSTAR.COM