Tags: Wastach | economy | value stock | investing

Wasatch's Stewart: Manning the Watchtower for Value Stocks

By    |   Wednesday, 09 April 2014 12:29 PM

The current U.S. economy — a "grind-it-out, . . . three yards and a cloud of dust" environment — requires a scrappy approach for investing in stocks, according to Sam Stewart, chairman and chief investment officer at Wasatch Funds.

"The good news is that the economy is inching ahead, rather than slipping back into recession. The bad news is that the progress is modest and unlikely to put much of a dent in unemployment," Stewart wrote in an article for Investment News.

"Because our current growth rate is below not only past recoveries but also below the long-term trend, you can see why I've dubbed this recovery as 'the tortoise economy.'"

Editor's Note:
18.79% Annual Returns ... for Life?

Stewart noted after-tax corporate profits now add up to 11 percent of GDP, a whopping 75 percent above their historic average, due to rising productivity at the same time employers have kept wages and salaries down. Government deficit spending has also helped corporate profits, he said.

"If these trends reverse to some extent and if after-tax corporate profits eventually come down to more normal levels, investors will need to consider the implications for stock valuations," Stewart warned.

According to Wasatch's thinking, overall stock valuations are "relatively high," so the company is focusing on individual stocks that it finds to be unique somehow. Stewart said the portfolios he manages are currently 10 percent cash — higher than normal.

"I'm operating under the philosophy of 'When in doubt, throw it out.' I'm continually reviewing my portfolios for holdings in which the stock price has gotten ahead of the company's fundamentals. And I'm pruning those holdings so the portfolios are only left with the companies in which I'm comfortable with the valuations.

Stewart said the company also is focusing on companies that pay dividends, another sign of prudence amid current market turbulence.

Speaking of dividends, 24/7 Wall St. took a look at the top dividend stocks held by Warren Buffett's Berkshire Hathaway.

For those wanting to invest like the famous stock picker, 24/7 said its estimation of Buffet's best yield plays include Conoco Phillips, Exxon Mobil, General Motors, General Electric, Coca-Cola and Procter & Gamble.

Editor's Note: 18.79% Annual Returns ... for Life?

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The current U.S. economy — a "grind-it-out, . . . three yards and a cloud of dust" environment — requires a scrappy approach for investing in stocks, according to Sam Stewart, chairman and chief investment officer at Wasatch Funds.
Wastach, economy, value stock, investing
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2014-29-09
Wednesday, 09 April 2014 12:29 PM
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