Vanguard founder Jack Bogle says the stock market is a “giant distraction to the business of investing”. Over the long run, he tells Fox Business Network, stock returns depend on how well Corporate America does; but in the short term, stocks have “inexplicable ups and downs” based on people’s opinions — not facts. He says that given the current situation, the market is poised to deliver average investment returns of about 7% or so for the next decade, based on corporate earnings growth and dividend yield. But in the short term, it will deviate sharply above and below that figure […]
In his latest article for Morningstar, Validea CEO John Reese looks at top stocks from the service sector — an area of the economy that he says is faring better than many realize. “Service-type companies, and the service sector as a whole, have become the real bellwethers of U.S. economic activity,” Reese writes. “And lately, if you listen to the pundits, you’d think that the service sector is in dire straits, with fears of another recession — or worse — having dominated the headlines for the past couple months. But guess what? The real, hard data from the service sector hasn’t […]
Warren Buffett and Berkshire Hathaway recently announced a share buy-back authorization, which may be signaling optimism from Buffett on the economy. The move marks the first time in four decades that Berkshire will be authorized to buy back its own shares, according to Bloomberg. It is allowed to do so only if its price is no more than 10% above book value. Berkshire’s willingness to repurchase shares is a bullish sign, according to Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC. He told Bloomberg that the announcement “is a bit out of character and for that reason is […]
Hedge fund guru Joel Greenblatt says that, based on trailing free cash flow yields, stocks are trading at levels that put them in about the 95th percentile of cheapness when examining the past 20 years of market history. Greenblatt tells CNBC that if the past is any indication, valuation levels this low could be proceeded by a 15%-20% gain for the broader market over the next year, and gains of more than 30% for value-focused portfolios. Taking advantage of these bargains means having the fortitude to invest in some very unloved stocks, however, Greenblatt says.
Top value investor Charles De Vaulx has been cutting back on gold holdings and is high on oil and gas stocks and Japanese equities. De Vaulx tells Bloomberg that with cash yielding very little, bond yields low, and gold having gone “parabolic” over the summer, stocks of good companies with solid dividends look like attractive options right now. He’s still hesitant about Europe, where he says quality stocks haven’t come down enough in price to make them bargains, and many of the stocks that have fallen sharply are too risky. He says that discrimination may actually be a bullish sign, […]
Wells Capital Management Chief Investment Strategist James Paulsen says he thinks it’s time to lighten up on safety-oriented stocks like utilities and consumer staples, and put cash into more cyclical-type stocks, like industrials and emerging market plays. Paulsen tells Bloomberg that if October data continues to show that the U.S. economy isn’t entering a new recession, he sees a nice boost for stocks on the horizon, even if growth remains tepid.
Highly-rated strategist Francois Trahan says that “deflation” is not a dirty word, and that the Federal Reserve could help the economy by allowing deflation to stem commodity price inflation that is “eroding people’s pockets”. Trahan says Fed members and other policymakers and economists are relying on economic principles that aren’t relevant right now. Three main things are making the economy fundamentally different today than it was years ago, he says: consumers are deleveraging; governments are cutting payrolls; and the Federal Reserve has become ineffective. His outlook for the economy is “atrocious”, he says, and he advocates a cautious, safety-first investment approach […]
The Cabot Market Letter is having another market-beating year, and its editor is preaching discipline amid the current market volatility. “Going forward, it’s important to remember to take your cues from the market itself, and not from the headlines that are sure to push the market up and down in the days ahead,” Michael Cintolo recently wrote to subscribers, according to MarketWatch’s Peter Brimelow. “The goal is to preserve most of your capital today, so that you can make that much more once a new uptrend truly gets underway.” Brimelow says Cintolo showed his discipline over the past week. On […]
J.P. Morgan U.S. equity strategist Thomas Lee says we may be near an ideal buying opportunity for stocks. According to Lee, 53% of stocks are trading for less than 12 times earnings, the most stocks selling so cheap since late 2008, the Financial Post reports. In addition, 51% of stocks are trading for less than two times book value, Lee says. Back when the market bottomed in March 2009, 67% of stocks were trading below 12 times earnings, and 66% of stocks traded for less than two times book value. Lee says the valuation figures matter. “Investors have pointed to […]
Barry Ritholtz of FusionIQ and The Big Picture blog says that the Federal Reserve has done just about all it can do it fix the economy, and that changes to fiscal policy are needed to really get things moving in the right direction. But, he adds, many government officials have a track record of getting fiscal policy completely backwards. Saying that he suspects the Fed’s blunt language in its recent statement was a message to Congress to take action, Ritholtz writes on his blog that he doesn’t think the elected officials who have been preaching austerity will listen. “Don’t expect […]
Yale Economist and housing guru Robert Shiller says the government still isn’t doing enough to help the housing market. Shiller, who called the bursting of both the tech stock and housing bubbles, tells Fox Business Network that he’s worried we could see more downside for housing prices. He also says that he has a “gut feeling” that the next bubble to pop could be the stock market — though he notes that he has a poor track record of predicting stock market moves.
Hedge fund guru Barton Biggs says he’s only 20% net long on equities in this market, and says we may be on the eve of another financial crisis. Biggs says policymakers have tools at their disposal to help, but have failed to come together to do so in Europe or the U.S. “In times like this, there’s nothing the matter with cash,” Biggs says. “I don’t think any place is a place to invest right now.” He adds that “When there is clarity, and when the authorities move and do something, emerging markets will be a fabulous place to invest. […]
Fidelity’s Anthony Bolton says he’s optimistic about global equities, and valuations are a big reason. “I am still a bull of world equity markets,” Bolton, who produced an exceptional track record in the U.K. and now oversees a China-focused fund, said at an Investment Week conference. “I think in this business you have got to look at what is discounted in valuations, not at the outlook. A very cautious view is discounted in valuations at the moment. But I do not think we ever got into [the phase of] overvaluation in the bull cycle.” Bolton sees a bifurcated world in […]
Top value investor Ron Muhlenkamp says the Federal Reserve’s “twist” plan is counterproductive and will end up resulting in the opposite of what is intended. Muhlenkamp says the Fed is doing more to keep interest rates low “as if the reason people weren’t buying houses had anything to do with interest rates”. He says lower interest rates will end up leading to people spending less, particularly those who are retired or nearing retirement. Muhlenkamp says he’s holding more cash than usual, and is finding the best values among higher quality stocks, which he calls “Cadillacs” — that is, companies with […]
Bruce Berkowitz, who in 2010 was named one of Morningstar’s Fund Managers of the Decade but has been hit hard in the past year, says he continues to be high on unloved financial stocks that have been dragging his portfolio down. Berkowitz tells WealthTrack’s Consuelo Mack that all of the negativity about financials has driven many of their stock prices down to incredibly attractive levels. “The negatives are all uncertainty about the future. And what I try and do is focus on the facts of today,” he says. “So, when you look at the income statements, they’re making huge cash […]