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Where to Take Risk in Today's Market

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  • Description

    David Sowerby of Loomis, Sayles & Co. gives his outlook for the markets.

  • Duration 5:14
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-- -- well so the Dow down more than 350.

Points solidly in the red for a second day now.

Where continue where can investors look to make some money today David Sowerby.

Chief market analyst and portfolio manager Loomis -- company joins us now with some investment opportunities David first let me get your take.

On this -- sell off and the message the market's sending about.

Where things this economy's headed.

-- simply put it's it's mistrust.

Mistrust in policy out of Europe in particular with respect to.

Sovereign debt crisis particularly in Southern Europe again.

Mistrust in United States with regard to our own deficits.

In a combination of the two just continues to weigh heavily on the market.

And frankly it's increasingly more and more difficult to defense stocks but.

Nevertheless.

Like a good defense lawyer I'm here to -- stocks to a certain degree.

Our I will get to some of your your kicks in your outlook on the market.

But do you think to my question to Philip you know from an equities perspective are we looking at it is this a significant turn around a significant reset capitulation navy.

Or is this just more of the same volatility we saw kind of all through this summer and people are just gonna at some point piling in and buy it up again.

I I think ultimately the latter just another retest of the August -- -- was another gut check.

We -- in in late August we saw -- briefly in early September and here we go again.

What were were test and those August 8 lowest but I think from a valuation perspective.

That there's a better than up 50% or even higher probability that.

We'll look back and say August 8 were the lows or late September were were retesting the lows.

-- at the the adept investor who's willing to be a little bit wrong before -- are ultimately more right who's willing to be a net buyer today.

We'll look back in six months to a year and say.

I I took risk appropriately.

And was a buyer okay so talking -- -- prices rise anywhere from eight to 12% from these levels.

Like to see that happened -- -- -- you taking risks what kind of stocks do you like to hear still a fan of stocks outperforming other asset classes right now.

And I am I think I think.

Stocks outperformed the majority asset classes there is a compelling case to be made.

For -- prefer opportunistic high yield debt given the back up in yields or spread.

In in an environment as well so that's a close second however on the equity side.

Unlike the bottom of march of 2009 I think -- the bottoming here in August September of 2011.

Is a chance to look at the average stock in USP 500 as of recently just this afternoon trading about.

23%.

Below its 52 week high.

And that type of environment they've thrown out the good companies with a mediocre companies into the extent you can trade up in quality and qualities an overused term but trade up and in valuation combined with cash flow and free cash flow.

I think He got opportunities on the west remains a go to -- tech or Cole who had a good earnings number last night.

Apple.

Oracle trades at eleven times earnings -- trades at thirteen to fourteen times forward estimates and believable estimates I think you find opportunity there.

On the consumer side more in the media.

Liberty Media interactive which is the parent company for QVC the Internet online shopper.

Represents valuation to me and at as well as CBS which is a high free cash flow plight.

What do you know why do you like said that Liberty Media -- with a QVC with all the pressures on the consumer right now.

Well I think I think from a -- of profit margin perspective.

They don't have the bricks and mortar than a traditional retailer handset -- QVC.

That that at QVC they are very at the very skilled at.

Tracking what sells what doesn't almost simultaneously.

And can introduce new products quite quickly.

-- way out to a consumer that is very value conscious and very price conscious and it's worked for Liberty Media.

Interactive.

And we found in in it seems spirit.

Many companies that are what we call special situations or spin outs were Liberty Media interactive is the tracking company that's gonna spin out along with liberty.

Liberty corporate Liberty Capital.

That that represents I think unlocking value to investors.

A little bit different story is ITT which is splitting into three components.

Defense water.

And and flow control.

And we found over the years and it's especially abundant today that the spin outs of these special situations.

As companies try to unlock value and break into pieces.

Really it's been a long term.

-- excess return generator to investors and that's where I'm seeing.

Cash flow opportunity today we certainly gave us a lot of ideas today David many thanks for your time -- to your point does quality names being punished by an otherwise broader weaker market.

So take that I can't by the innocent when they get thrown out with the guilty and I think you've got -- opportunity today.

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