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Stock prices are down but they're not 'dirt cheap'

Scott Gamm

Yes, the stock market has seen its first meaningful pullback in months recently, but that doesn’t mean the market is awash with buying opportunities.

“I don’t think anything looks dirt cheap,” said David Bahnsen, founder and chief investment officer of The Bahnsen Group. “From where we were, you might be down 3%. It’s not hyper-compelling.”

The S&P 500 (^GSPC) is down 4.3% since its intraday record high of 2,954 on May 1. The market pullback intensified soon after a May 5 tweet from President Trump, which called for an increase in tariffs on Chinese goods. That seemed to spook investors, as tariffs are largely viewed as a tax that compresses corporate margins while sometimes raising prices for customers.

The lowest point for the S&P 500 since the May 5 tweet was roughly 2,801. Right now, the S&P 500 is up almost 13% year-to-date, hence Bahnsen’s skepticism on whether now is an opportune time to be putting fresh capital to work in stocks.

Trader Jonathan Corpina works on the floor of the New York Stock Exchange, Thursday, May 23, 2019. (AP Photo/Richard Drew)

Sector wise, he finds energy sector valuations attractive.

“There might be some names that are really attractive [in energy],” he said. “You have to look at your portfolio and determine what’s come down the most if you have cash available.”

For Bahnsen, he’s focused on high yielding stocks instead of index fund investing.

“We’re cash-flow generative investors - we want companies paying their dividends and growing their dividends,” he said. “You want to be defensive in this period - there is a lot of uncertainty in the world right now.”

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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