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Jones Villalta Asset Management CIO Tom Villalta on how a behavioral financial process is used to invest in the markets.
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And my next guest says you probably missing out on some of the best market opportunities because you've been blind sided.
By fear top a while -- the lead portfolio manager of the Jones the lost opportunity bodies joining me now from Austin, Texas in a Fox Business exclusive.
OK first of all you've got a fund that's doing very well in fact it's -- 3% today on top of another double digit percentage move.
You talk about behavioral financial process and that's how you invest what is that.
Well it's a fundamental approach with with how you approach large cap stocks.
We're now looking -- for structural factors such as what I would.
What I would call things such as lack of analyst coverage.
Or a liquidity markets what we're looking for things that are more pervasive things that have to do with how humans approach forward uncertainties.
OK to me that means how humans approach and that is a lot of them think what their heart vs their head and without the emotion.
They tend not to stick with with real sort of rules that like -- a profit for example never breaks his own rules He just doesn't but most of us get panicked and we -- selling to the downside or -- too scared to buy when there's opportunity.
You've got thirty to 35 top holdings in your in your fun.
How did you go about picking them.
Well we approach the market from three different levels first -- looking at the broader market were looking at.
What is the -- and what is the tenor of the discussion in the broader market is there a flight from risk.
Our is there over concerns about economic consequences a long term basis are there then we're looking at sectors.
Well our feeling is that yes there are that and that people are looking at the market today through the prism of 2008 and 2009.
And I'm talking specifically the domestic market.
When the fundamentals this market really have a lot are a lot different than they were in ninth 2002009.
Look at what we in the morning and around and.
That's up here at their -- the step one we have on the screen.
Begin with a thousand largest US stocks and then Quant models screen for selling -- prices that are inexpensive so that's basically a PE ratio toward their growth prospect.
That -- that to about a 10050 stocks -- talk about some of the ones that are in there and you know half of your top holdings.
Our financials which have.
Kind of been in the dumps are very fearful for a lot of people to get done well.
Yeah financials are an area where you couldn't get out and more over and over pessimism where you couldn't get -- more lowest -- Wall -- and main street or.
In politics.
And and these are areas where you tend to get when you tend to get -- -- -- to the way in which people approach some of the underlying assumptions to valuation.
They tend to take a look at short term short term periods in trying to extrapolate a longer term scenario out of that.
In our feeling it is that if -- -- take a step back and you look at the underlying fundamentals.
And on a long term basis you're gonna see that there's more value there.
Now when we look at a company like Bank of America I mean certainly we're out looking at a growth story at this point Bank of America does not need to have a growth story to be a undervalued securities today.
I mean I think there is a longer term growth story to that stock but to make it a value it doesn't have to be when it's trading -- only a third of book value.
Here's something interesting that I saw within your fund while one of your top holdings is Dell.
And you've got a more than 3% sort of allocation to that you say that Hewlett-Packard is a market play right now.
So -- don't have to choose or because He was getting out of the PC business it's now considered in a different category.
You.
-- very interest -- because our feeling is that people are looking at Hewlett-Packard.
And they're looking at what's happening in management as representative of the company as a whole.
You've got a very large company with a lot of what I would call institutional.
Institutional inertia attached or we have some very good people that are running segments of that company.
And I think with a little bit of turnover at the top while we don't like to see it certainly it doesn't diminish the long term earning power I mean of a company that's gone from.
About eight billion in cash flow from operations to twelve billion over the last five years and this is the stock is trading today as -- as if you're gonna see cash flow contract by.
Two and a half 3% per year over the next ten years let me pull out for for example -- trading at ten dollars and change it's gone as high as fifteen in recent months and then it pulled back.
Went as low as nine where did you buy it where do you like it.
Well we we bought it at a sub ten dollar level so it's trading not too far off more we bought it we like it.
All the way up into the twenties are feeling is that Ford is a company who has brought down their break even point significantly.
If altered their cost structure.
And therefore as we move forward into a period which is more reminiscent of that prior twenty year period.
Which would be 1516.
Million North American sales rate that you're gonna see this company be extraordinarily profitable.
Mean we're still operating fairly low North American sales rate as far as car sales in the United States.
And you know people are taking those numbers they're kind of extrapolating a much longer horizon.
When in fact we believe that you look out to three years you're gonna see the sales rates increased dramatically and and because of that it's and it's a real value.
A half I'm hearing you correctly it's don't just look at the tiny -- -- on the ho hum the geologic time back and got to be a little bit broader Tom good to see thank you for joining us.
Talk a little regardless of -- Walter -- he's the up lead portfolio manager and the fund is called the opportunity fund JD OFX.
Is the ticker symbol for folks we.
