Tags: van Doorn | value | stocks | long term

MarketWatch: 5 Value Stocks for a Market Plunge

By    |   Thursday, 22 May 2014 09:35 AM

For investors worried about a market meltdown, MarketWatch's Philip van Doorn offers five value stocks to consider.

Three come recommended by David Bechtel, a principal at Barrow Funds, and two by Tim Piechowski, a portfolio manager at Alpine Capital Research.

Bechtel told van Doorn that his firm is "following a private-equity approach to investing in companies. We are not looking at them as pieces of paper to trade, but as economic ownership in businesses."

Editor's Note:
New Warning — Stocks on Verge of Major Collapse


"We roll up our sleeves and look at cash flow generation and operating margins, and a company's ability and willingness to reinvest cash it generates back into its business profitably," he explained. "This tells us the management team wants to do what it is doing, likes the business that it's in, and that it is a good business."

Piechowski takes a more conservative approach than Bechtel does. He told van Doorn that his firm's objective is to "preserve capital from permanent loss during periods of economic decline while providing a return above the cost of capital and market average in the long term."

"Since our firm was founded in 2000, the firm has held 52 stocks. We have very low turnover (holding positions over six years on average) and try to get these numbers very well," he noted.

1. Myriad Genetics (MYGN) produces diagnostic tests for physicians. Its sales per share rose 26 percent in the quarter ended March 31 from a year earlier. "It is an interesting firm with an exceptionally attractive cash flow yield," Bechtel told van Doorn.

2. GNC Holdings (GNC) sells nutrition products. Sluggish sales growth, a falling share price and a low forward price-earnings ratio may make GNC a good value play, van Doorn explained. GNC has a "very attractive valuation compared to historical," Bechtel said.

3. Ferro Corp. (FOE) makes specialty chemicals. It's a "classic American industrial company," Bechtel said. "We really like their ability to generate cash flow. Those cash flow dollars can be bought inexpensively."

4. JPMorgan Chase (JPM) is the country's largest bank. "Over time, JPM should be able to grow its franchise by a couple percent each year. We would expect them to grow mostly in the asset management business," Piechowski told van Doorn.

5. Microsoft (MSFT) is the world's largest software maker. "Today, 70 percent of operating income comes from Office, servers and tools," Piechowski said. "These are predominantly geared toward the enterprise. The consumer is not that big a driver for the company."

Meanwhile, in an interview with Fortune magazine, American Express CEO Ken Chenault listed companies he believes will thrive in the growing commerce conducted on mobile devices.

"Clearly there are five platforms that will play an important role and be very powerful: Amazon, Apple, Google, Facebook, and Alibaba," he said.

Editor's Note: New Warning — Stocks on Verge of Major Collapse

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For investors worried about a market meltdown, MarketWatch's Philip van Doorn offers five value stocks to consider.
van Doorn, value, stocks, long term
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2014-35-22
Thursday, 22 May 2014 09:35 AM
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