مورغان
10-02-2002, Sun 7:42 PM
لقاء مع مستثمر مشهور Michael K. Farr رؤيته للسوق وبعض النصائح
والتوصيات على بعض الاسهم الجيده
Personal Investing: INVESTING Q&A
``Americans love stocks when they're expensive, and we hate them when they're cheap,'' points out Michael K. Farr, president of investment managers Farr, Miller & Washington. Farr urges investors to follow a long-term strategy and favors a blend of value and growth styles. In fact, he prefers looking for stocks ``with value characteristics that show dynamic earnings growth.'' Applying this standard leads him to recommend such diverse stocks as American Power Conversion, PepsiCo, and United Parcel Service.
ADVERTISEMENT
Farr's comments were made in a chat presented Jan. 31 by BusinessWeek Online on America Online, in response to questions from the audience and from Jack Dierdorff and Karyn McCormack of BW Online. Following are edited excerpts friom this chat. Edited excerpts from this chat follow. A complete transcript is available from BusinessWeek Online on AOL, keyword: BW Talk.
Q: Do you favor value or growth stocks now? Or a blend of both?
A: I think that either value or growth practiced in their most pure form are essentially flawed. Value says that you consider the accounts receivable, real estate, bricks and mortar, etc., and come up with a hard value. If the price per share you derive is $20 per share, and that stock is trading at $15, you buy the stock and wait for it to appreciate. That doesn't always happen, because sometimes stocks are cheap for a reason.... Sometimes when you see a Mercedes selling for $1,000, it might not even be worth that.
Likewise, growth can be flawed. Just because a company is growing at 30% per year doesn't mean it's worth its price. We learned this difficult lesson with the dot-coms. I much prefer to buy companies with value characteristics that have earnings growth -- dynamic earnings growth, not acquisition or balance-sheet manipulation. Increasing market share, experienced management, etc., is what I look for.
Q: In looking for companies with dynamic earnings growth, what are some of your favorites based on that criterion?
A: Earnings growth needs to be examined pretty closely, to determine whether you're talking about bounce-back growth or consistent earnings growth. Some companies that I like with consistent growth are American Power Conversion (NasdaqNM:APCC). Also, United Parcel Service (NYSE:UPS - news), with 13% earnings growth at 23 to 24 times earnings, represents good value. PepsiCo (NYSE:PEP - news) is a more stable grower, with 13% earnings growth at around 25 times earnings.
On the riskier side, I like EMC (EMC) and Dell Computer (DELL). I continue to like Microsoft (MSFT). In the financial sector, I like Wells Fargo (WFC), with a 12% growth rate, Citigroup (C), Goldman Sachs (GS), and Freddie Mac (FRE).
Q: What about tech stocks? Will they ever rebound?
A: Yes, and I think that tech stocks with earnings represent some very good investment opportunities. After the Y2K spending explosion through the end of 1999, capital expenditures for technology came to a screeching halt, while inventories at tech manufacturers continued to increase. This glut...has put pressure on the market [ever since].... As long as companies continue to meet [earnings] expectations, we may see a rise in tech expenditures, but don't make the mistake we made in the beginning of 2000 and buy momentum. Stick with quality, earnings, and management, every time.
Q: If you had to pick one stock for your child long-term, what would it be? Or is it wise to bank on just one?
A: Diversification always provides for safety. I would probably choose an S&P index fund as quickly as I would choose anything. That said, I think stocks like Microsoft, McDonald's (MCD), Pepsi, Procter & Gamble (PG), the good old tried-and-true names, will probably leave you in the best stead. More aggressive investors might even consider companies like AOL Time Warner (AOL).
Q: What's your take on the biotech mania that seems to be brewing?
A: There's something reminiscent of the dot-coms stocks in the biotech mania, and yet there is some substance to it. Five years ago, I got to meet Bill Gates in Washington, and I asked him what he was investing in. He said biotechs, and I asked why. He said...that newer computers, with faster speeds and capacity for data manipulation, would allow biotech development to occur more rapidly and efficiently than ever before.
I think investors need to take a diversified approach to investing in general, but especially when dealing with such speculative companies that may have such volatile earnings. My choice would be Biotech Holders Trust (BBH). It represents 20 of the largest biotechs in the marketplace. About 20% of the trust is Amgen (AMGN), and the structure of this trust is very interesting for tax purposes.
Q: What about the energy sector, Michael? And Dynegy (DYN)?
A: The energy sector doesn't afford the sort of growth that I look for most of the time. It's a cyclical business, and it's commodity- and capital-leveraged. Those are variables that I find difficult to live with.
Dynegy worries me. It worries me that they were such a large counterpart to so many of Enron's trades, it worries me that they were one of the first suitors in line to buy Enron. It worries me that the same Arthur Andersen office [that did Enron's book] does the books for Dynegy. There are a number of red flags for this company at present.
Q: What index funds would you recommend?
A: I think that staying with the most broad index [the S&P 500] for longer periods makes the most sense.... Investing hearkens back to ``if something seems too good to be true, it probably is.'' Also, don't invest what you can't afford to lose. The late '90s provided great enticement to new investors and lulled them into a false sense of security.
Investing is an uncertain process that needs to be done deliberately, doggedly, and in a disciplined way. Always remember: Boring is good.... Americans are funny investors. We love stocks when they're expensive, and we hate them when they're cheap.
Q: Michael, if you were in cash today, what would you do?
A: I'd invest it -- if my time horizon was for the long term and I don't need it for the next 5 or 10 years.
Q: A few of your best picks?
A: The four industries I like the best are financials, tech stocks, medicals, and consumer. EMC will do as well as any of my companies over the next five years, but it will NOT be a boring ride. I think it will benefit [from being] the leader in data storage and also as a result of its very strong management.
والتوصيات على بعض الاسهم الجيده
Personal Investing: INVESTING Q&A
``Americans love stocks when they're expensive, and we hate them when they're cheap,'' points out Michael K. Farr, president of investment managers Farr, Miller & Washington. Farr urges investors to follow a long-term strategy and favors a blend of value and growth styles. In fact, he prefers looking for stocks ``with value characteristics that show dynamic earnings growth.'' Applying this standard leads him to recommend such diverse stocks as American Power Conversion, PepsiCo, and United Parcel Service.
ADVERTISEMENT
Farr's comments were made in a chat presented Jan. 31 by BusinessWeek Online on America Online, in response to questions from the audience and from Jack Dierdorff and Karyn McCormack of BW Online. Following are edited excerpts friom this chat. Edited excerpts from this chat follow. A complete transcript is available from BusinessWeek Online on AOL, keyword: BW Talk.
Q: Do you favor value or growth stocks now? Or a blend of both?
A: I think that either value or growth practiced in their most pure form are essentially flawed. Value says that you consider the accounts receivable, real estate, bricks and mortar, etc., and come up with a hard value. If the price per share you derive is $20 per share, and that stock is trading at $15, you buy the stock and wait for it to appreciate. That doesn't always happen, because sometimes stocks are cheap for a reason.... Sometimes when you see a Mercedes selling for $1,000, it might not even be worth that.
Likewise, growth can be flawed. Just because a company is growing at 30% per year doesn't mean it's worth its price. We learned this difficult lesson with the dot-coms. I much prefer to buy companies with value characteristics that have earnings growth -- dynamic earnings growth, not acquisition or balance-sheet manipulation. Increasing market share, experienced management, etc., is what I look for.
Q: In looking for companies with dynamic earnings growth, what are some of your favorites based on that criterion?
A: Earnings growth needs to be examined pretty closely, to determine whether you're talking about bounce-back growth or consistent earnings growth. Some companies that I like with consistent growth are American Power Conversion (NasdaqNM:APCC). Also, United Parcel Service (NYSE:UPS - news), with 13% earnings growth at 23 to 24 times earnings, represents good value. PepsiCo (NYSE:PEP - news) is a more stable grower, with 13% earnings growth at around 25 times earnings.
On the riskier side, I like EMC (EMC) and Dell Computer (DELL). I continue to like Microsoft (MSFT). In the financial sector, I like Wells Fargo (WFC), with a 12% growth rate, Citigroup (C), Goldman Sachs (GS), and Freddie Mac (FRE).
Q: What about tech stocks? Will they ever rebound?
A: Yes, and I think that tech stocks with earnings represent some very good investment opportunities. After the Y2K spending explosion through the end of 1999, capital expenditures for technology came to a screeching halt, while inventories at tech manufacturers continued to increase. This glut...has put pressure on the market [ever since].... As long as companies continue to meet [earnings] expectations, we may see a rise in tech expenditures, but don't make the mistake we made in the beginning of 2000 and buy momentum. Stick with quality, earnings, and management, every time.
Q: If you had to pick one stock for your child long-term, what would it be? Or is it wise to bank on just one?
A: Diversification always provides for safety. I would probably choose an S&P index fund as quickly as I would choose anything. That said, I think stocks like Microsoft, McDonald's (MCD), Pepsi, Procter & Gamble (PG), the good old tried-and-true names, will probably leave you in the best stead. More aggressive investors might even consider companies like AOL Time Warner (AOL).
Q: What's your take on the biotech mania that seems to be brewing?
A: There's something reminiscent of the dot-coms stocks in the biotech mania, and yet there is some substance to it. Five years ago, I got to meet Bill Gates in Washington, and I asked him what he was investing in. He said biotechs, and I asked why. He said...that newer computers, with faster speeds and capacity for data manipulation, would allow biotech development to occur more rapidly and efficiently than ever before.
I think investors need to take a diversified approach to investing in general, but especially when dealing with such speculative companies that may have such volatile earnings. My choice would be Biotech Holders Trust (BBH). It represents 20 of the largest biotechs in the marketplace. About 20% of the trust is Amgen (AMGN), and the structure of this trust is very interesting for tax purposes.
Q: What about the energy sector, Michael? And Dynegy (DYN)?
A: The energy sector doesn't afford the sort of growth that I look for most of the time. It's a cyclical business, and it's commodity- and capital-leveraged. Those are variables that I find difficult to live with.
Dynegy worries me. It worries me that they were such a large counterpart to so many of Enron's trades, it worries me that they were one of the first suitors in line to buy Enron. It worries me that the same Arthur Andersen office [that did Enron's book] does the books for Dynegy. There are a number of red flags for this company at present.
Q: What index funds would you recommend?
A: I think that staying with the most broad index [the S&P 500] for longer periods makes the most sense.... Investing hearkens back to ``if something seems too good to be true, it probably is.'' Also, don't invest what you can't afford to lose. The late '90s provided great enticement to new investors and lulled them into a false sense of security.
Investing is an uncertain process that needs to be done deliberately, doggedly, and in a disciplined way. Always remember: Boring is good.... Americans are funny investors. We love stocks when they're expensive, and we hate them when they're cheap.
Q: Michael, if you were in cash today, what would you do?
A: I'd invest it -- if my time horizon was for the long term and I don't need it for the next 5 or 10 years.
Q: A few of your best picks?
A: The four industries I like the best are financials, tech stocks, medicals, and consumer. EMC will do as well as any of my companies over the next five years, but it will NOT be a boring ride. I think it will benefit [from being] the leader in data storage and also as a result of its very strong management.