One nice thing about Christmas is that you can count on it. It never changes. Without exception, that fabled day in December demands attention and grinds the Western world to a halt.
While Fed Chairman Ben Bernanke's speech from Jackson Hole has been circled in red on investor calenders for weeks now, the event has been shrouded in uncertainty as we tried to get agreement on whether Santa or the Grinch would show up. Now we know. Though Bernanke didn't promise additional measures to help the U.S. economy, he indicated that policy makers will make their September meeting a two day gathering instead of one day as had been planned.
Is that reason for optimism? One can't say for sure, but the market initially slumped after Bernanke's speech and then rebounded to trade higher. Darren Pollock, portfolio manager at Cheviot Value Management, says that Bernanke will do "whatever it takes to prop up the stock market. It's just a matter of time. He doesn't want to be the Fed chairman to preside over the Great Depression."
But even with Ben watching our backs, Pollock isn't going all-in on the risk trade. He's sticking with the oh-so-popular multinational trade, a theme I have many times deemed to be the most crowded on earth.
"The multinationals we own are simply not overcrowded because of the valuations," Pollock retorts. "We own companies like Microsoft (MSFT) Wal-Mart (WMT) and Berkshire Hathaway (BRK-A). Companies that people sort of love to hate, and that has allowed us to get these great companies at great prices."
You should know that Cheviot's first investing rule is "Don't lose money." So it should come as no surprise that a portfolio manager from a shop like this, who also quotes Benjamin Graham, would be drawn to behemoths like Microsoft or Johnson & Johnson (JNJ) or Pfizer (PFE).
"We own Microsoft not because it's firing on all cylinders like Apple (AAPL) is, but because it's doing fairly well at what it does," Pollock says, facetiously adding that "it's only making $2 billion of net income per month." Add in a single-digit price-to-earnings ratio and a 3% dividend yield, and you've got yourself one big pile of value.
But for all its size and profitability and dominance, Microsoft has been dead money in the stock market for a decade, and yet, I cannot count the number of guests who now routinely cite it as a top pick.
You are surely familiar with the saying, "Don't fight the Fed." Well, given the surge in love for names like Microsoft and Wal-Mart, I think a second line should be added to that statement: "Don't fight the Fed and don't underestimate the power of consensus."