Hit 'Em Where They Ain't: A Wall Street Transcript Interview with Famous Contrarian Investor Bobby Edgerton, Co-Founder and Chief Investment Officer of the Capital Investment Companies

Wall Street Transcript

67 WALL STREET, New York - October 29, 2013 - The Wall Street Transcript has just published its current Investing Strategies Report. This special feature contains expert industry commentary through in-depth interviews with experienced Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Value Investing - Exposure to Emerging Markets - Long-Term Investing - Large-Cap, Deep-Value

Companies include: The Coca-Cola Company (KO), Exxon Mobil Corp. (XOM), Wal-Mart Stores Inc. (WMT), Apple Inc. (AAPL), Automatic Data Processing, Inc (ADP), International Business Machine (IBM), Visa, Inc. (V), Nike Inc. (NKE), Google Inc. (GOOG), Costco Wholesale Corporation (COST), LeapFrog Enterprises Inc. (LF), Clorox Corporation (CLX), Winnebago Industries Inc. (WGO), QUALCOMM Inc. (QCOM), Hologic Inc. (HOLX), Teradyne Inc. (TER), Advantest Corp. (ATE) and many others.

In the following excerpt from the current Investing Strategies Report, an expert contrarian portfolio manager discusses his investing methodology and top picks:

...So a contrarian is really someone who does the opposite of the crowd. If a group of stocks are really hot and up in the stock market, he or she doesn't mind. If a good group of stocks are down and out of favor and the majority of people are selling those stocks, that's when you buy, and that's my definition of a contrarian. I think all great investors do the opposite of the crowd. When real estate is sky high and the sheep are buying, good real estate investors are selling, and then when real estate goes into a depression/recession like we've been in, that's when smart real estate investors buy. So to me that's what a contrarian is.

TWST: What are some events that would trigger a selloff that would be a cue for you to go ahead and buy?

Mr. Edgerton: It's primarily when these companies are not earning what the Wall Street crowd estimates they should earn. If Wall Street estimates that Exxon should cash flow $58 billion this year, and they only cash flow $53 billion and they sell the company off, their stock off, that's when I buy. The essence of the stock market, the core essence, is that all of these companies have two values.

Number one is precisely to the penny what the stock market values the company at, and of course, that's the number of shares outstanding times the price. So IBM (IBM) has 1 billion shares outstanding - actually 1.1 billion, the stock market says the company is worth right at $200 billion. But who can put a real value on the IBM Corporation, their patents, their intellectual properties, all of the accounts they've got with businesses and governments all over the world? That's impossible. Who can put a value on Exxon's 25 billion barrels of oil reserves? That changes, depending on the Middle East, the volatile price of oil, their incredible talent at drilling for oil and gas, their refineries, pipelines, chemical plants, land holdings, mineral rights holdings. You can't put a value on that. So it's a little bit mythical when you sit down and see what the stock market is valuing the company at.

But everyday, to the penny, the stock market values each one of these companies, virtually to the penny. Stock market now says Apple is worth $430 billion and Exxon is worth $370 billion. Well, can anybody in the world say that Apple is worth $60 billion, to the penny, more than Exxon? Of course not, but that's what goes on. But as I tell my clients, about 90% of what we're doing is investing the company and not the stock.

TWST: What is your outlook for the economy and for the markets, and how do those views inform your approach to investing at this point in time?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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