Cash Is Trash? Not To These Value Fund Managers – Bloomberg 07-26-13

Salient to Investors:

The Weitz Value and Weitz Partners Value funds each have cash stakes close to 30 percent. The Yacktman Focused fund has 19 percent in cash. The Westwood Income Opportunity fund has 16 percent in cash,  The IVA Worldwide Fund has 28 percent in cash, the GoodHaven fund has 33 percent in cash.

Morninstar says the average diversified US stock fund has less than 5 percent in cash, while the the average world allocation fund has less than 15 percent in cash.

The Leuthold Group reports that the median PE ratio for large-cap value stocks is 13 percent to 25 percent above its long-term historic norm; large-cap growth stocks trade at an 8 percent to 10 percent discount to their historic norm.

Charles de Vaulx at IVA Worldwide is not finding enough mis-priced securities to buy.

Tom Forester at Forester Value fund said central banks are driving the markets higher, not fundamentals.

Dowe Bynum at the Cook & Bynum fund is more than 40 percent in cash and says it would take a 10 percent to 15 percent drop in any of their existing holdings to consider putting cash to work.

Mark Freeman at the Westwood Income Opportunity fund says bonds are too expensive and expects a transitional market to higher bond yields to last 6 months to a year.

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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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