William Greiner: Stock Market Rally Has Just Begun
NEW YORK (TheStreet) -- Investors will soon focus on company profits and growth prospects instead of sovereign-debt fears, giving the stock-market a lift, said William Greiner, manager of the new Scout Global Equity Fund(SCGLX).
The first signs were already seen yesterday, when U.S. stocks surged and Treasuries fell as lower jobless claims and strong earnings outweighed concern of a mounting debt crisis in Italy and France. Cisco, the world's biggest maker of networking equipment, and News Corp., owner of Fox television, rallied yesterday after reporting greater-than-expected quarterly earnings.
The Scout Global Equity Fund comprises "sleeves" of companies that reflect existing domestic and international strategies, said Scout Investments, a unit of UMB Financial(UMBF). Greiner is bullish on Apple(AAPL) and Cracker Barrel(CRBL), among other companies.
Why are you so bullish for the second half?
Greiner: Once we get past this debt situation in Washington and perhaps see some improvement within the European space, investors will start focusing on the income-statement side of the economy versus the balance-sheet side of the economy. That tends to give stocks a lift, so our view is particularly good through the end of the year.
Speaking of strong balance sheets and income statements, Apple had a terrific earnings report. How much longer can they keep it up?
Greiner: They keep it up for years, quite frankly. The true Apple story, as far as the next leg is concerned, is penetrating the corporate veil. The iPad is the launch pad that really starts that process. Apple still represents less than 10% of the PC market share in the world by scale. As they pick up market share, the stock will continue to move to the upside. Corporate profits are going to run for at least the next two to three years' time.
You are also a big fan of Cracker Barrel. A lot of the big restaurant names have complained about higher input costs. What does this mean for Cracker Barrel?
Greiner: This is a very solid story from the standpoint of demographics. Their average age of people coming through the door is 44 years old. They have a lot of young grandparents and grandchildren as customers. You don't see a lot of people between the age of 20 and 40 in those stores, but you do see people in the age bracket that's going to see a bulge going forward. So this is a play on demographics as much as anything else over the next three to five years.
One of your top picks out of Japan is Honda. Why Honda and not Toyota?
Greiner: They are a major player in China. And it is starting to look like China is getting its inflation problem, which we think is tied to food prices, under control. As food prices start to moderate a little bit, Chinese consumers will grow more confident. More than likely you are going to see an uptick between now and the end of the year in Chinese growth, and you will see strong car and motorcycle sales.
There's a lot of worry about "fracking" here in the U.S. Will this affect McDermott International(MDR), which is a big engineer for drillers?
Greiner: We like McDermott because they are not really exposed as dramatically to that issue as many of the other players in the industry. They are a major supplier of products and services to Qatar and also to Saudi Arabia. They do a lot of offshore drilling work outside the United States as opposed to onshore where a lot of these environmental concerns are really an issue.
-- Reported by Gregg Greenberg in New York.
