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Thesis Fund Management’s Stephen Roseman, Spectrum Management Group’s Bob Phillips and Zacks.com’s Kevin Cook on the outlook for the markets.
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It was all -- -- all -- this -- -- -- -- equities have good valuations right now -- let's -- -- that they -- what we're hearing from companies so from a very early in the reporting season.
Really some concern looking forward so how does that play into your -- bullish beliefs.
Well the most important thing we can do is make sure that we're buying assets with a sufficient margin of safety.
Make sure they're cheap enough and discounting all of the potential bad news that might be out there in the marketplace so to the extent companies are guiding down.
And the stocks are reacting that would indicate that they weren't priced for this environment.
Stuff -- markets or do you look at individual names very much so individual names.
We are fundamental bottoms up we care about the notion of margin of safety.
Making sure that we're paying fifty cents on the dollar for dollars worth of assets that type of approach to investing.
Is an old standby this comes from Ben Graham it comes from Warren Buffett.
This is something that -- work for generations of investors the idea is you wanna make sure that you're paying less for an asset in the intrinsic value the assets.
Well let me -- you you say that the best outcome for the S&P by the end of the year is to be flat what's that based on and what -- sold so far lump -- of these sudden negative outlook the we're hearing from other companies are reporting.
Well I think what it's all driven by dysfunction when -- -- still dysfunction in Europe -- the US.
On the other world is slowing yours you just can't avoid that outcome of that -- -- conclusion Europe is in a recession.
That China exports to Europe in the US URS the US growth is tepid at best so everybody's slowing down and you look at that what drives US economy.
And fundamentally it's consumer spending it's -- 70% of our economy.
We have no jobs growth in your every year personal income growth -- less than 1%.
So -- you have to look out and say what is going to drive those earnings growth going forward.
Weasels see any catalyst for.
-- -- Kevin made sure is all about timing is anatomy back on June 20 ninth you you were telling us earlier that you sold on the Euro euphoria from the summit.
Which is really catch as catch -- on any given day it's either up or down over there but but how.
What sign posts do you look for in order to help you make those moves up the chess pieces on the board when it comes to your portfolio.
Well you know I -- currencies for ten years and I don't trade in every day.
But that boost we got 998 -- sunny optimism was just too much reside -- sell the Euro and I kept my short positions in stocks.
Because -- -- thought that the worst weeks he was thirteen 75 on the S&P on the upside bought you know the bulls are still really in charge here.
Above thirteen thirty so you know it's truly looking at the technicals but also looking at the fundamental news flow -- slowing growth.
The -- surprise of US economic data has been to the downside consistently for the past few months.
And go with Euro worries and tried -- really not -- but it would major stimulus yet I think the risk is still to the downside.
Talking of Euro worries says stuff on your shorting McDonald's right now is that purely based on what's going on in Europe is that what's concerning it.
Absolute let's be clear there are companies that are gonna suffer from the economic Malays in Europe and in the US.
And as a manager of a long short fund we have the flexibility.
To be longs were talking earlier investments -- radically discounting a margin of safety that we look for but at the same time.
We can be short companies that are gonna suffer through a slowing Europe a slowing US is slowing Asia.
-- but let me just push you on that -- you quoted Warren Buffett and Benjamin Graham Warren Buffett -- Coca-Cola Adidas and sell it even though it is like McDonald's it has massive international exposure.
Insurers so the idea is again whether or not the asset is -- equally discounting the environment.
And the earnings power so there are companies out there and not -- -- -- -- talk about mcdonalds and talk but collectively are short book.
That aren't adequately discounting the slowdown that we're seeing globally.
Those the types of names we look to short.
So as I said earlier it's in its critical when you're buying an asset to buy something at fifty cents on the dollar the idea is.
When shorting the inverse of -- -- you're looking for something trading at say a dollar fifty -- and it's actually worth a dollar in terms of the out.
-- Bob we've got -- so a top sectors there we know that people who -- bearish like yourself still make investments what do you like right now where are you parking your money.
In a parking space that might levitate or elevate nonetheless.
I think you have to look for cash flow obviously -- I say that I mean dividends from.
That -- in an emotional market it's a trader's market.
-- for that margin of safety -- -- -- talking about you know we like companies like -- -- let me out of -- today.
Traded down 2% today which you know what it's got about a 3.4 percent dividend.
You discount that over three or four year five year period of time it's going to be a pretty good return we believe.
Same thing for a company like Procter & Gamble very much out of favor.
Now emotionally -- what could easily happen is those discounts to intrinsic value.
Can go from 50% discounts -- thirty or 40% in the key is to understand your.
Ability to withstand that you conviction -- the company so you don't make a bad move at the wrong time and our major concern is that with this major slowdown that the world economy.
People get emotional.
And once again will see in the next few months.
Probably some kind of major event that's that's a sell off -- sort of a mini panic.
-- Nevada many panic -- -- a lot of headlines or headwinds I should say Kevin look we've got the US election we got the fiscal cliff we've got.
Europe dragging on and on and we still -- getting these weak numbers out of China I mean that doesn't seem to be a lot of bright spots going forward.
No I I don't see that many you know longer term I'm bullish non US equities.
Because it's the best place to put your money right now and that's why I think you're still seeing inflows hear the ones investing in Europe.
And and not that much money is getting pulled out of emerging markets so it's not gonna go to cash it's gonna come.
-- US equity markets where stock pickers like one of the gentlemen you're talking to their own you know look look at things individually bottom lot.
But you -- look there's so much weakness ahead GDP estimates -- gonna continue to come down we're gonna see.
-- guess he won a half percent.
I in the second half if we're lucky and and the Fed is gonna -- look at what he's waiting I'm quantitative easing he's in the pocket and he went a little while there.
-- you know stuff -- as -- finish up here what is in your opinion that the biggest mistake the individual investor is making right now.
So we're one people are paying any price for growth because to the point that you were making earlier there's a paucity of growth there's a concern about a global slowdown.
Remember there's no such thing as a good company are back company -- say it's good price or bad price for an asset and that's the distinction between -- longs and shorts we tend to be.
Short companies that have a bad price I either too expensive relative their intrinsic value and we tend to be long companies.
That -- attractive price for cheap vs entrance -- Stephon Grossman Bob Phillips great to see thank you so much Kevin do us a favor stem Bible get back to you.
