Bloomberg TV"Morning Call" September 28, 2006
Nick P. Calamos discusses investment opportunities in the mid-cycle slowdown
The current mid-cycle slowdown in the economy brings its own set of opportunities.
Nick P. Calamos, senior executive vice president and co-chief investment officer of Calamos Asset Management, emphasized this point in an appearance Thursday on Bloomberg TV's "Morning Call."
"Our view is that the economy is going through a mid-cycle slowdown, which was already discounted in the markets in May through July," Calamos said. "We think as the economy slows down, there's going to be a shift out of the more cyclical companies into more growth-like companies."
Calamos said he's currently favoring large-cap, blue chip growth issues; these issues have seen a great deal of earnings growth that's not yet reflected in stock prices.
Among some quality large-cap growth names, "earnings have gone up quite a bit in the past four to five years," he said, and this movement has occurred without corresponding increases in stock prices.
"So, we think it's a real attractive time for us to step in," he said, "step out of cyclicals and step into big-cap, blue chip, growth names."
In this environment, Calamos said he believes these higher-quality growth stocks may be well positioned. For example, Microsoft has seen dramatic growth in cash flow and earnings over the last five years—but its stock price has remained relatively flat. "We're optimistic that Microsoft has a lot of upside here," Calamos said.
Similarly, compelling stories exist for Home Depot and Coca Cola. Calamos said both stocks offer potential for high return on invested capital and good business strategies, while trading at a discount to the market or to their historic relative market multiple.
For more on Nick Calamos' view on the market and long-term investment opportunities, please visit our commentary section.