During his recent interview with CNBC, Bill Nygren explained why today is a great time to be a traditional value investor. Here’s an excerpt from the interview:
Nygren: I think what’s important for investors to realize is as good a year as value had in 2022 that it’s given all of that back so far in ’23 and then some in a little less than six months.
So in ’22 when the growth names were getting hit so hard, at Oakmark we were paying a lot of attention to growth companies that we thought GAAP accounting didn’t do justice to their income statement.
So companies that had a lot of income statement spending that we would add back because we thought it was long-term spending and should be capitalized.
And it allowed us to purchase stocks like Adobe and Uber, along with some of the longer-term holdings that we had like Netflix, Alphabet, Meta, so that provided part of our portfolio and has certainly helped us do well versus value peers this year.
But I don’t want people to get a misimpression about Oakmark. Most of our portfolio is really cheap stocks on traditional metrics.
We think today is a great time to be a traditional value investor.
After this big run that growth has had, and we’ve got the S&P up close to 20 times earnings, there’s still lots of stocks out there that are at single digit PEs that we believe through a combination of dividend yield, cash flow reinvestment, and just economic growth, should be able to provide returns that are competitive with the S&P 500.
You can watch the entire discussion here:
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