Assembling a Portfolio at Points of Market Pessimism: Money Manager Stuart Brown Discusses Fully Investing in a Cheap Market
67 WALL STREET, New York - May 21, 2013 - The Wall Street Transcript has just published its Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Investing in Financial Services - Long-Term Investing - Large Cap Investing - Value Investing - High Quality Companies - Bottom-up Investing - All-Cap Growth Investing - Investing in Emerging Markets
Companies include: GameStop Corp. (GME), Time Warner Inc. (TWX), Sinclair Broadcast Group Inc. (SBGI) and many more.
In the following excerpt from the Investing Strategies Report, an experienced portfolio manager discusses his asset allocation philosophy for investors:
TWST: Of your two investment strategies, is there one in particular you'd like to focus on today?
Mr. Brown: In general, if the market is cheap as it is now, we will be fully invested. When the vast majority of stocks are going down, that's when you have to remember that the market spends most of its time going up. So at those points of maximum pessimism, that's when we assemble a portfolio, whether a sector strategy or individual stocks.
For the individual stocks, we're focusing on the very best companies that are out there. They're companies that have stable or accelerating earnings growth rates. The typical stock for us will have growing revenues and growing earnings.
In most cases, they're companies that are buying back their own stock, paying off their debt, or maybe have no debt. They're companies that pay a healthy dividend, and in most cases, they've been increasing their dividend.
When we assemble a portfolio, they are companies that these days are paying a dividend yield that's greater than the 10-year Treasury, but they're growing their earnings. So at some point down the road they should be selling at a higher price if they continue to grow their earnings.
Right upfront, we are going to pay a price that makes them competitive with bonds. So if bonds are paying, say, 3%, we're looking for an earnings yield right up front that's 3% or higher. So priced like bonds, we're looking for stocks that are trading very inexpensively, that have stable or accelerating earnings growth rates.
As far as the sector strategy goes, what we're doing is we're looking for those segments of the economy that are outperforming the averages with the least amount of volatility. When the market is in a tailspin, that's when we assemble...
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