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Fort Washington Investment Advisors CIO Nick Sargen on the outlook for the markets and how much investors should focus on stocks for their portfolio.
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Our next guest is cautiously optimistic about this rally saying that it's fundamentally based.
And that is actually room to for the market to go higher joining us now -- sergeant.
History -- investment officer for Fort Washington investment advisors.
Nick cautiously optimistic.
Does that mean we keep buying we buy on dips or we sort of buying and was for the best.
I think a good question I think -- right now certainly if I sought -- Up from anybody who's missed this rally I think that makes sense because the market isn't overvalued.
And it's it's moved a lot.
On you -- you if somebody said gee I missed it I'm -- it is going higher than I would say.
Don't jump in with all -- you've got kind of you know -- weigh in because we have come a long -- so somewhere between those two strategies make sense.
Nick are you concerned about the catalysts I know that you think that this LT our -- and to remind the viewers is that gigantic.
Money printing operation from the ECB that that was sort of the catalyst for this particular run.
Are you worried that about future catalyst to keep this thing going.
Well I think actually that was one of the catalysts that was the thing that took the fear factor that out Lehman to was about to happen.
But I think that Charles the other catalyst is that you people -- worried about the US economy.
And theirs -- just no doubt that the data we've gotten for you know past few months of come in on the stronger than expected side.
So I think that that is the other prop and that's actually the one have more confidence in.
Then now what's happening outside the United States -- basically leave the optimist in me is.
I like what I'm seeing inside the US still a bit nervous about developments outside the US.
You -- that point nick about fundamentals coming -- -- lots of data points at least in this country showing some strength coming back.
I as well the one thing we also learned today from consumer prices and gas prices rose almost 1% last month that's the first time we -- increase in about three months.
Gas prices and energy prices are starting to creep back up again.
How big -- an issue due for this -- is being and 2012 because we know it in May be almost inevitable with with inflation in all the money printing -- we're gonna see a rise but isn't it 2012 issue -- somewhere beyond.
You know that's -- that is the issue why worry about is whether -- we could get.
You know some -- in oil prices.
I actually think it would be contained if it was just economic developments because even though the US is doing better Europe obviously is in recession.
You have the big -- Is what's taking place in the middle east of the tensions with Iran so.
I worry about more potential supply disruptions and you're absolutely right you know last year people -- feeling pretty good.
At this time year and then as we all know the oil prices shot up and that was the tax on the American consumer.
That led to the slowdown.
Nick are you playing this market in terms of hedging because it seems like you're willing to -- chosen in the market that you're doing so cautiously.
And you're doing so -- -- -- so what are the best ways out there -- some ideas for our audience in terms of a different hedging place.
Yeah well I think right now in terms of Bob you what are the safe plays and what was the winning strategy for last year when everybody was nervous on your people were paying up for high quality names.
And a lot of dividend paying stocks and actually last year for our parents portfolio.
-- that was a place that we were mainly putting new money into.
This year you know our our own assessment is it's okay to have the dividend paying stocks because they are safe.
And that's a little bit of if you like my hedge on the market.
Are -- where we're seeing opportunities is in some of the beaten up value names that were crushed last year.
They've actually been the best performing areas of the market this year so really what we're doing is a little bit of a balance between.
Value stocks and some high quality names dividend payers.
Nick we've got lesson men and we like educate the audience.
What what do you consider what metrics do you use -- quickly.
That help you determine what is -- true value play.
I'm you know I think that -- what we look at -- -- a lot of people look at PE multiples and the like.
Arm that's OK and -- but the issue I have thought Charles's.
That's looking at earnings out a year pub we have a method where we look at valuation over a longer period -- time.
And look at -- kind of transformed when the stock has normally -- in terms of rate of return on its capital.
And so that's actually the metric that we're looking at is kind of -- rate of return on the firm's capital over a longer period.
You know I like that too because that helps people overcome.
These ups and downs he's short term up and down -- I can't tell you how many stocks I've sold -- Two years ago one year gonna look erratic Solomon twenty another fifty all because in their terms ups and downs you know fantastic we really appreciate it and it -- -- Washington investment advisors isn't.
