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Microsoft an Underpriced Stock?

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    Ariel Investments’ Charles Bobrinskoy on how to choose stocks that are undervalued.

  • Duration 3:54
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Well with the SP 500 up more than 9% this year we have money manager who says the great debate on Wall Street isn't about where the market goes from here he's confident.

Equities continue heading.

Up Charlie the brits going says that the real debate is about which stocks are the least expensive -- cheapest and most undervalued.

He's vice chairman a portfolio manager of the -- focus funded aerial investments four point four billion dollars in assets under management.

But -- say there's this great debate right now Charlie that's taking place at the moment some people say yes stocks are absolutely cheap.

Others consider them off the floor and -- getting a little more expensive upon which side do you come down.

We stand still think there's a lot of value in the stock market we think people institutions.

Pension funds have taken a lot of money out of the stock market.

And so stocks are relatively cheap especially compared to the alternative which is bonds you do have to put your money somewhere and we think stocks are very cheap compared to -- Well let's talk about financials -- -- -- still little bullish on financials Goldman Sachs clearly is that we -- it was never -- Was a steal at ninety dollars a share it's now above -- 120 was up.

Over 5% today is it's still cheap at a 120 dollars a share.

It is not nearly as cheap as it wise it was what we call a fat pitch at 88 was ridiculously cheap and now obviously some of the easy -- been made but we still think it's a good value in the way you -- you measure an investment bank is relative to its.

Tangible equity and Goldman Sachs has a tangible book value tangible equity of over a 130.

Pot and so we still think it's relatively cheap not as cheap as Morgan Stanley Morgan Stanley is even cheaper and it would be our number one recommending.

You're number one my recommendation is organs I am finances among among evidence.

Well let's get to another one that you really like and it's not a financial and that is Microsoft Microsoft hit a 52 week cut the day before yesterday which gets everybody excited they've got windows say.

But stretch it out to ten years and it hasn't done anything.

You think now is the time I've heard that a lot over the past two years after talk about the time and it wasn't the time why now.

-- you haven't heard it from me for the last ten years -- -- wildly overpriced ten years ago when it was trading at 35 times earnings.

Now it's trading if you back out the cash and the balance sheet for less than ten times -- so it was an overpriced stock.

Now it's an under priced out.

And it's had a very nice run this year it's -- over 25%.

I think after today so things are starting to -- positively.

Everybody hated this stock everybody thought that apple is -- their clocks.

They were you losing market share that the iPad was gonna make a PC irrelevant none of those things are gonna be true Microsoft is gonna grow overseas they're doing very well on emerging markets.

And it's a very inexpensive stocks -- Charlie let's talk bonds for just a second just one in particular the treasury -- ten year treasury.

Take 2% yield on a ten year treasury.

I don't see that ending well the U.

Now I agree with you completely.

You know we we would say and this is an extreme statements.

But I would say that long term bonds are -- bubble.

I think that there is real damage that's gonna get done in long term bonds people think that they're buying a risk free asset.

And they don't take into account the fact that they can get paid back with inflated dollars.

And so I think there's a real risk of people losing a lot of money in bonds we we think -- less than.

2% interest rates on long term.

Government bonds is now -- yield particularly.

With the fact that we think inflation is coming the government is gonna at some -- have to print money to get rid of the deficits that there incurring.

Equities over treasuries Charlie -- going thank you very much for joining us he's vice chair portfolio manager -- aerial investments let's.

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