Gross Says Buffett to Soros Careers Fueled by Expansion – Bloomberg 04-03-13

Salient to Investors:

Bill Gross at Pimco said:

  • The most renowned investors from Buffett to Fuss to Soros may owe their reputations to the most attractive era for money management as expanding credit fueled gains in asset prices across markets.
  • Maybe the era made the man, not the man who made the era – the real test of greatness is whether they can adapt to historical changes occurring over half a century or longer.
  • Higher market volatility, an aging population, and climate change could make investing far more challenging in coming decades.
  • What if zero-bound interest rates has led to a mathematical dead-end for bonds in 2012-2013 and other conjoined asset classes? What if QE eventually collapses instead of elevate asset prices?
  • Investors such as Bill Miller are prone to exposing their Achilles heel the longer they stay in the money-management business. Peter Lynch was smart to leave when the ‘gettin’ was good.
  • There is not a Bond King or a Stock King or an Investor Sovereign alive that can claim title to a throne.

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Apple at Cheapest Since 2000 Signals Buy to Gamco, Thornburg – Bloomberg 02-13-13

Salient to Investors:

Analysts have cut price targets by 21 percent since the stock peaked in September 2012. Apple is trading at 10.6 times reported earnings versus the S&P 500’s multiple of 15, near the widest discount since December 2000. The last time Apple traded at such a discount, it went on to rally 47 percent in 2001.

The 78 companies that were at least 30 percent cheaper than the S&P 500 at the beginning of 2012 rose 15 percent on average during the year versus the 13 percent gain in the index.

The median analyst predicts Apple stock will rise to $613.40 over the next 12 months versus $780.69 in September 2012. 51 of 64 analysts have Buy ratings, 2 have Sell ratings. Analysts estimate earnings will rise at an average 7.7 percent a year through 2015, and gross margin to remain below 40 percent through 2016 versus the peak of 47 percent in FQ2 2012. Apple’s PEG ratio is 0.58 versus the average of 3.1 for S&P 500 companies, and trails all but four stocks.

Apple investors Gamco Investors, Thornburg Investment Mgmt, and Brown Advisory said the pessimism is exaggerated because Apple still dominates the smartphone and tablet markets and has enough cash to return to shareholders.

Howard Ward at Gamco said Apple is being held to a standard unlike any other company, and is not the zombie it is being valued like.

Bill Miller at Legg Mason says Apple is undervalued and could be worth 50 percent more should it raise its dividend.

Doron Eisenberg at Brown Advisory said Apple is a high-quality company in the fastest-growing areas, and value investors can view the cash-rich balance sheet as a positive.

Connor Browne at Thornburg said there is more room for the company to grow, in which event today’s valuation will look like a great buying opportunity in hindsight.

Donald Yacktman at Yacktman Asset Mgmt said Apple chose to have a high-margin, niche product, thus creating an enormous umbrella for others to come in underneath. Yacktman said the P/E ratio is very deceptive when you look at a stock like Apple, given where the profit margin has been and where it’s likely to be down the road.

David Kessler at Robotti said Apple is not low enough to invest in.

Apple investor John Roscoe at Roosevelt Investment said Apple deserves a similar multiple to branded-products companies such as Ralph Lauren because it has attracted loyal customers willing to pay up for Apple products while Apple’s army of design and engineering people work on the next best thing. Ralph Lauren trades at 23 times earnings, more than double Apple’s valuation.

John Buckingham at Al Frank Asset Mgmt would start adding to positions should the stock drop to $430. Buckingham said we want people to be questioning it.

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Legg Mason Folds Miller Value Unit Into ClearBridge – Bloomberg 01-16-13

Salient to Investors:

Legg Mason is folding Bill Miller’s Legg Mason Capital Management division into its ClearBridge Investments equity unit as assets have tumbled and as it tries to reverse five years of client redemptions.

Assets at Legg Mason Capital Management have fallen to $7 billion from a peak of $70 billion in 2007. The Value fund’s assets have plunged 90 percent from a $21 billion peak in 2007, to $2.2 billion as of Jan. 14.

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Economy Has Green Shoots From China to U.S. as Data Surprise – Bloomberg 11-14-12

Salient to Investors:

Stronger housing demand and hiring in the US and accelerating factory output and retail sales in China is providing international growth as Europe and Japan stagnate.

Jim O’Neill at Goldman Sachs Asset Mgmt said improving China and the US is extremely good news.

Tim Drayson at Legal & General Investment Mgmt said policy uncertainty is affecting business confidence, delaying capital expenditure especially in the US.

Bank of America Merrill Lynch said  fund managers’ global growth expectations were the most optimistic since February 2011 and the outlook for China’s economy rose to a 3-year high. For the first time in 7 months a majority said profits will improve rather than deteriorate, and a net 37 percent of asset allocators were overweight in global emerging-market equities versus 32 percent last month.

Aviva Investors Global Services said that more expansive monetary policies give a 65 percent probability of global growth over the next six months with a 20 percent chance growth stalls.

Bank of Israel Governor Stanley Fischer said the risk has abated somewhat, but the world is still awfully close to a recession and there’s renewed concern about Greece, new concern about Germany – when Germany slows down that is big in Europe.

Citigroup surprise indices show the US and China are increasingly proving stronger than anticipated.

David Hensley at JPMorgan Chase said behind the upturn is continued monetary stimulus and a potential recovery in industrial growth. Hensley expects modest acceleration.

Bill Miller at Legg Mason Capital Mgmt said if housing continues to recover, it will underpin the economy. Miller said the economy is troughing and will lead to growth in 2013.

The median analyst sees China GDP growth at 7.7 percent in Q4 and 7.9 percent in Q4.

John McCormick at Royal Bank of Scotland is mildly bullish and cautiously optimistic with respect to China, predicting certain growth of over 7.5 percent and maybe over 8 percent.

Analysts experts Japan’s contraction will extend into Q4.

Moody’s Investors Service lowered its forecasts for G-20 to 3 percent in 2013 versus 2.7 percent in 2012.

Mohamed El-Erian at Pimco said a true global rebound may be impossible until political uncertainty dissipates, and expects world growth will remain sluggish.

Chen Zhiwu at Yale said the new Chinese leadership brings new energy which is good news through half1 2013.

Economists expect Brazil GDP will increase 4 percent in 2013 versus 1.5 percent in 2012.

Nariman Behravesh at IHS said global growth has stabilized and sees no more downgrades in the outlook.

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Legg Mason’s Miller Says Bank Stocks to Rise on Housing – Bloomberg 1-08-12

Salient to Investors:

Bill Miller at Legg Mason said because housing has done so well, the next move there is in financials. Miller said an improved housing market means banks’ mortgage origination businesses will improve.

Miller’s fund had 40 percent of assets in financial stocks as of Sept. 30, and owns insurers and mortgage REITs.

CoreLogic said US home prices rose 5 percent in September from a year earlier, the biggest 12-month increase since July 2006.

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