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Fort Pitt Capital Co-Founder Charlie Smith on how investors can invest so their portfolio can grow in any market condition.
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-- -- -- are you looking -- an investor who's really looking for a so called all weather fund designed to make you money in the best and the worst of times.
We'll Charlie Smith co-founder and the chief investment officer of the fort Pitt capital total return fund says look no further.
Charlie's fund its crushing the competition he is joining us.
From Pittsburg in a Fox Business exclusive what you strategy how do you do this what do you do once you buy a stock.
Well hi Liz yeah.
Actually the strategy starts probably two or three years before we buy a stock will follow a company.
Typically for a couple years before -- even on the stocks now.
The strategy is to understand the business as best we can so that we can know what it's worth.
So that we can then buy it at a price which makes it a good investment for us the biggest mistake individual investors make.
Is buying businesses at prices which make them a bad investment for the investor.
Every business has a true investment value we try to figure out what that is and then buy it at a reasonable price what's -- turn over to buy and sell a -- -- trader.
No our turnover is about eight to 10% per year so that equates to a holding period of ten to twelve years.
Oh OK so do you hear what -- Buffett you're you're holding because you love these names do you go for the big hot blue chips -- do you go for the unloved names.
Well will will take a bargain wherever we can find it the way it turns out today is we've got mostly large businesses in the portfolio.
Five years ago we were mostly mid cap we wolf.
We will decide where the cheapest segment of the market is and then go there so.
We really don't have a bias towards smaller large we'll take value wherever we could find it I can imagine at some point.
If we had a collapse in the Russell 2000 we did eventually even become small cap buyers but that we let price tell us where to go.
Okay let's get to some names here now what I I want to tell people look you can go out today and you can buy 36 dollars sweater from the gap war.
Or say J.
Crew or you could buy a share.
Of one of your favorite stocks and that -- Verizon 36 bucks why do you like Verizon it's jumping today.
Well we like what we call a lifeline business and they deflating economy.
We've got an economy that's not particularly in the real estate segment slowly deflating and in the financial side of the economy.
And we like lifeline businesses businesses that have customers who aren't gonna give up the product come hell or high water.
In our society almost nonexistent -- you have a cell phone so.
Even if the economy's weak and joblessness days and you know 99 point 1% 1415 million unemployed.
People are gonna wanna keep their cell -- they may not go for the that the most expensive plans with all the bells and whistles.
But the the cash flows from the the wireless business are going to be steady for Verizon.
At the same time they're also getting their costs in line.
In their legacy wire -- business so you combine those two factors with the idea that capital spending as a percentage of revenue is also falling.
-- it leads -- pretty good free cash flow.
And basically everything I said for Verizon applies also to eighteen to.
-- that dividend of five point 7% is certainly nice I want your second pick and that is in the Flash Memory space.
Right.
SanDisk is the leader in technology for flash -- NAND Flash Memory.
I was looking on some web sites today as part of Cyber Monday and I see that.
Intel is now offering solid state disk drives for less than a dollar a gigabyte and that's really a crossover point from where solid state drives.
Become -- priced competitive with hard drives.
And of course with the flooding in Thailand -- hard drive pricing has been spiking -- so.
I think we're gonna see a significant acceleration in the market share for solid state disk drives and obviously SanDisk is a big supplier into that market.
Well we should all remember what that flooding has done it -- shut down the hard disk business or at least made it awfully costly and delayed for any business that uses hard drive -- That's an interest in play let's get to lows and this is LO EWS not Lowe's the home home improvement company.
Correct -- is the conglomerate run not starkly by the that Tisch family.
-- is actually compound shareholder equity over the last 45 or so years at rates higher than Berkshire Hathaway.
It's it's say -- insurance conglomerate they own 80% of CNA.
They own 54%.
Of one of the big drilling companies.
There and they also have.
Loews Hotels.
It basically it's it's a management which is super shareholder conscious.
They've historically been able to buy back the stock at discount prices vs most companies who tend -- -- was shareholder buybacks.
It's it's a management -- which is really concerned about building shareholder equity.
Not necessarily in in the form of options for management.
That Tisch family owns significant portion of this business so their interests are directly aligned with -- as a shareholder.
Is your favorite sector is an unloved sectors you feel the people in 2012 investing in this particular sector could make some real money what is -- -- Well yes as I mentioned -- its Telecom and cable but also.
Aerospace.
You know even during the worst of the recession worldwide air traffic continued to rise.
And the backlogs for people like Boeing terms of the number of aircraft in backlog.
Give me pretty good confidence that their earnings trend is going to be Bob able to be met their earnings estimates are going to be able to be met.
For the next two to three years so almost no matter what happens in the world economy.
They've got a backlog which is gonna serve them and serve shareholders for the next couple years another name and -- portfolio in the aerospace area Honeywell.
Big maker of avionics -- been some questions about problems in depicted defense spending sequestration from the super committee.
Is is going to be knocking back defense spending here over the next dot couple years.
But it looks like Boeing's commercial aircraft business is going to be able to carry them through any issues on the defense side so aerospace both in terms of Boeing and Honeywell is a segment.
We like well CEO of Honeywell David Cody had sat on the Erskine -- the Bowles Simpson committee and had some great ideas and too -- the super committee could make that happen -- Charlie good to see it thank you very much.
Thank you Charlie Smith is the co-founder and chief investment officer of the fort Pitt capital total return fund and -- annualized returns over several years have been about five.
