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'Outstanding Time to Buy': Value Maven Herro Sticks to Bullish Guns
Posted Nov 11, 2008 07:00am EST by Aaron Task in Investing, Software and Services, Commodities"Stocks are cheap" has been (and remains) the mantra of value investors lately, including investing legends like Warren Buffett and Jeremy Grantham.
Heading into Monday, when the market got "cheaper" still, the S&P 500 was trading with a forward P/E ratio of 10.4 vs. an average of 21.1 over the past decade, Bloomberg reports.
"This is an outstanding time to buy - very selectively," says David Herro, who oversees about $11 billion as chief international officer of Harris Associates, including the $3.8 billion Oakmark International fund. "All stocks are cheap -- some deservedly so. But now is the time to look for those business that have the financial strength to get through this weakness and have a business model, or franchise or unique selling proposition that will propel them [and] enable them to succeed when the recovery comes."
In addition to certain European banks, as discussed here, Herro recommends SAP and U.K.-based credit bureau Experian. The fund manager also believes recent weakness in commodity prices will benefit emerging markets that are big consumers (vs. producers) like China and India.
Full disclosure: The accompanying video was recorded Friday. Herro's fund was long the aforementioned stocks at that time, but holdings are subject to change.
Fuller disclosure: After a string of stellar performance that earned Herro high praise -- Smart Money named him one of the "World's Greatest Investors" last summer and he was Morningstar's "International Equity Fund Manager of the Year" in 2006 -- the fund manager suffered a reversal of fortune this year, along with many others.
The Oakmark fund he manages was down 25% year-to-date heading into this week, and his prior bullishness on Tech Ticker was ill timed -- although a bearish call on commodities this summer was prescient.
I suggest taking both his long-term and recent performance into consideration before coming to any conclusions.
93 Comments
Mark - Tuesday November 11, 2008 08:18AM EST
I don't understand. How can anyone say it is an 'Outstanding Time to Buy' when we are hearing about lay offs and reduced projections from major companies daily? What did I miss?
tomtom - Tuesday November 11, 2008 08:32AM EST
Want to invest sucesfully,pay no attention to stock or mutual fund so called experts.Do this;Write down ten stocks or mutual funsd on pieces of paper,roll them up in a ball,throw them on the floor and tell your dog to fetch. The piece of paper your dog returns with will be your stock pick of the day.Try it,it really works. TomTom
Dan - Tuesday November 11, 2008 08:34AM EST
Things are getting worse. If I had a nickel for everytime I heard someone say now is a great time to buy, I'd be sitting on one hell of a nestegg. Ther is no light at the end of this tunnel.
Yahoo! Finance User - Tuesday November 11, 2008 08:39AM EST
Stick to hevron Exxon and BP only if you want to win....If not forget it.....
Yahoo! Finance User - Tuesday November 11, 2008 08:42AM EST
SOLD !!!!!!!!!!!!!!!!!! all you want
Redwoodkape - Tuesday November 11, 2008 08:45AM EST
"This is an outstanding time to buy, but very selectively." That could be said at any time in the last 100 years with equal validity. It means "Buy only those stocks that are about to go up." Doh!
James - Tuesday November 11, 2008 08:46AM EST
Do not buy Dow Stocks until we bottom at 7350. Do not buy S&P until we bottom at 670. Do not buy any real estate until wages and inventory issues are addressed. Do not listen to these folks that are already long equities and are looking for the masses to stabilize their investments through cash injections into equity markets. Do not listen to real-estate moguls or industry people that tell you that RE markets will put in a bottom soon. Research indicates that the median home value must visit $171,000 before it is properly aligend with wage growth. The markets will still correct at least another 20% from here. The recovery will be slow and painful. Oh yeah, not only are we in a recession - we have been since the first quarter of 2007. We estimate emerging slowly during 2012 into a bottom trough economy. No V-shape recvovery. Be smart - wait for the bottom!
James - Tuesday November 11, 2008 08:47AM EST
Do not buy Dow Stocks until we bottom at 7350. Do not buy S&P until we bottom at 670. Do not buy any real estate until wages and inventory issues are addressed. Do not listen to these folks that are already long equities and are looking for the masses to stabilize their investments through cash injections into equity markets. Do not listen to real-estate moguls or industry people that tell you that RE markets will put in a bottom soon. Research indicates that the median home value must visit $171,000 before it is properly aligend with wage growth. The markets will still correct at least another 20% from here. The recovery will be slow and painful. Oh yeah, not only are we in a recession - we have been since the first quarter of 2007. We estimate emerging slowly during 2012 into a bottom trough economy. No V-shape recvovery. Be smart - wait for the bottom!
James - Tuesday November 11, 2008 08:48AM EST
Do not buy Dow Stocks until we bottom at 7350. Do not buy S&P until we bottom at 670. Do not buy any real estate until wages and inventory issues are addressed. Do not listen to these folks that are already long equities and are looking for the masses to stabilize their investments through cash injections into equity markets. Do not listen to real-estate moguls or industry people that tell you that RE markets will put in a bottom soon. Research indicates that the median home value must visit $171,000 before it is properly aligend with wage growth. The markets will still correct at least another 20% from here. The recovery will be slow and painful. Oh yeah, not only are we in a recession - we have been since the first quarter of 2007. We estimate emerging slowly during 2012 into a bottom trough economy. No V-shape recvovery. Be smart - wait for the bottom!
Bryan - Tuesday November 11, 2008 08:55AM EST
This Herro guy is a piece of work. He remained bullish on financial stocks the past few months in the OAKIX mutual fund and consequently lost even more. How could he make such an idiotic call? Why didn't he sell the financial stocks when the writing was on the wall, instead of BUYING more? If I could, I'd sue his ass off. My 401K lost more than 40% this year due to this guy's greed. He didn't care about my money. He cared about his reputation. So he made bad investments in more and more financial stocks when the ship on financial stocks was going down, down, down. Check out the holdings of OAKIX. It's all there in black and white.
Thrift Maven - Tuesday November 11, 2008 08:56AM EST
Jeremy Grantham and Warren Buffet are not slouches. Patience is the third orientation we have to learn...time, space, patience. Small investors have no staying power. Find a way to have staying power. Buy small amounts within your staying-power-account and be patient for the next thirty years. Read Charles D. Ellis. He is an investment penseur and very worthwhile and interesting to read.
J F - Tuesday November 11, 2008 09:03AM EST
If you have not lost much money in stocks yet, buy ETFs, when the market hit 8500, buy with 20% of all your money. When it 7500, add 25%. ... yes, it is about time to buy! But do NOT buy with all of your money. Especially DO not use margin! You will be suiciding to borrow to buy now!
Richard - Tuesday November 11, 2008 09:04AM EST
People forget that there's a difference between the STOCK MARKET and the ECONOMY, so stop talking about layoffs. They don't move at the same time, thus is hard to time the stock market The stock market always moves ealier than the economy (up or down). By the time the economy recovers, stock would have recoved much earlier. So this could be a great time to buy even though the economy sucks
Harold - Tuesday November 11, 2008 09:05AM EST
Let's NOT forget, the people that are saying that "it's time to buy" are the ones that are best friends with Jack Daniel and Johnny walker :-)
ANTHONY - Tuesday November 11, 2008 09:12AM EST
YOU TELL THEM WHEN YOU PUT IT IN , YOU TELL THEM WHEN YOU ARE GOING TAKE IT OUT,,WALSTREET CAN AND HAS USED A NUMBER OF ACTIONS TO CONTROL THE MARKET, SHORT, NAKED SHORT, RESELL. ETC.ETC.ETC, THE GVT, ONLY CONCERN IS THE A FASTER MOVEMENT OF MONEY,, THEY "ALWAYS GET A PIECE OF IT "WHEN IT MOVES.. AS LONG AS WALL STREET CAN "SHORT"THERE IS NO REASON TO BUY, NOT UNDER THESE CIRCUMSTANCES,,ANY GVT,ANY COUNTRY ANY GROUP CAN "KILL THE MARKET "AT ANY TIME,..BUT NOW "SHORTING HAS ALSO "SHORTED THE FEDERAL RESERVE.. THANKS CONGRESS
Bradley - Tuesday November 11, 2008 09:17AM EST
Today's stock market is like he Queen Mary coming about. I'd probably seek out the old standards,railroads, maybe a special niche play, but test the waters exercising increased caution. Buy in increments.
Vladimir - Tuesday November 11, 2008 09:26AM EST
It actually makes sense to me what the guy is saying. Look - very selectively - for businesses with little debt on their books and a sensible business model and/or brand and/or unique selling proposition. To play it safer, select companies with a decent dividend and have good earnings track record. Once you've defined those stocks, invest gradually. If you are really worried, don't invest more than 30-40% of your total disposable funds (i.e., those you won't need for the next few years). Things may get worse before they get better, but they get better long-term.
Ralph - Tuesday November 11, 2008 09:27AM EST
Geez... They could always get a little cheaper. I think I'm gonna wait till GOOG hits 194, AAPL 48, DRYS 3, GE 11, T 12, etc...
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Yahoo! Finance User - Tuesday November 11, 2008 07:49AM EST
I would recommend ANY reader/private investor no not come to ANY conclusion when reading/following up upon "stelar performer's advice", these guys always have an own agenda! This market is indeed fo rlong term investors, you don't need ANYONE to tell you what to buy! In 24-36 months from now all battered down sectors will perform well, wait until January/February to place your bets and leave the stelar performers in their own juice!