Oakmark’s William Nygren: Stocks Now Are ‘Once-in-Generation’ Opportunity

Thursday, 12 Jan 2012 08:15 AM

By Dan Weil

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A parade of investment wise-men now recommends stocks over bonds. You can add star Oakmark fund manager William Nygren to the list.

“We believe today's investors have a once-in-a-generation opportunity to use asset allocation to add to their investment returns,” he writes in a commentary to investors.

“It would be a shame to let anxiety about volatility get in the way of capitalizing on this opportunity. Stocks appear to us to be significantly undervalued relative to bonds.”

Nygren acknowledges he said the same thing a year ago, and bonds went on to cream stocks last year. So what’s different this time around?

“Companies now have higher earnings than they did a year ago, have fewer shares outstanding (meaning earnings per share grew even more than earnings), pay higher dividends, and have even more cash on their balance sheets,” he writes.

“We believe the average stock is worth more today than it was worth a year ago, yet it sells at about the same price.”

Meanwhile, bonds have just grown more overvalued as yields fall further and further, Nygren says.

Other big names who recently have touted stocks over bonds include University of Pennsylvania finance professor Jeremy Siegel and Vanguard Group founder John Bogle.

"I certainly wouldn't get out of the stock market," Bogle tells The Wall Street Journal. "The risks we face today are deeply serious, but the odds are that stocks will do better" than bonds.


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