Follow the Fed is a strategy that Douglas Roberts uses in picking stocks at Channel Capital Research Institute, where he is managing principal. Simply put, you should buy mid-to-large-cap stocks when the Federal Reserve Board is in a tight-money mode, and go for small caps when it eases on interest rates. Roberts is opting for big-caps, as he doesn't see the Fed cutting rates soon. Among his top choices: global real estate services outfit CB Richard Ellis Group (CBG). It helps with property leasing, sales, and valuation. CBRE benefits from the expanding global real estate business—on the rise or not—since its services are needed in any deal, says Roberts. Up from 20 in August to 32.21 on Mar. 14, CBRE is cheap based on consensus estimated profits of $1.98 for 2007 and $2.37 for 2008, he says. Brandon Dobell of Credit Suisse rates CBRE "outperform," with a 12-month target of 44.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial