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Welcome to Episode #105 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
This week, she finally gets to do an episode on one of the value investing legends: Jean-Marie Eveillard.
He ran the First Eagle Global Fund from 1979 to 2004 and was named Morningstar International Manager of the Year in 2001. Morningstar also gave him a Lifetime Achievement Award in 2003.
His First Eagle Global Fund returned 15.8% on average versus 13.7% for the S&P 500, according to Morningstar.
What are some of his insights after 50 years of value investing?
Value Investors Will Lag
Growth stocks have been on a tear. They have outperformed value for the last several years.
Eveillard saw this in the late 1990s as well. Back then, he didn’t buy tech or telecom, the two hot industries. His performance lagged that of the major indexes between 1997 and 2000.
During that time, his shareholders abandoned him. He has said 7 out of 10 shareholders in the fund left.
Value investors suffer and that’s difficult. Most value investors can’t stand the pain of underperforming so they abandon ship. That’s why true value investors are rare.
It’s too painful for most investors to stay the course.
Look at the Balance Sheet
Value investing isn’t always just about finding cheap stocks, but it’s also about them being both cheap and safe.
Warren Buffett deploys the moat as a way of finding safety and then he adds on the cheap factor.
Eveillard has used the EV/Ebitda fundamental to screen for companies and then does a deeper dive. Many value investors like to use this metric because it considers the debt, which screening by using only the P/E or P/S ratios does not.
Screening for Value the Eveillard Way
Tracey screened for stocks with an EV/Ebitda under 10, which usually indicates value.
She added a forward P/E of 15 or under so there was a second value metric and then tacked on a Zacks Rank of #1 (Strong Buy) or #2 (Buy) in order to get rising earnings estimates.
Even with the narrow Zacks Rank, it returned 132 stocks.
That’s a healthy selection.
Here are five stocks from the screen that caught her eye.
5 Cheap Stocks Right Now
1. Sony has an EV/Ebitda of just 5. It just reported a solid quarter and is seeing real returns in its music content business that could pay off big in the coming years. It’s now one of the largest music publishers in the world.
2. Carrizo Oil & Gas is a small cap E&P with production in the Eagle Ford Shale and Delaware Basin in Texas. It has an EV/Ebitda of 8.
3. Intel (INTC - Free Report) shares have fallen 1.3% year-to-date as investors don’t seem to know if this is a value or a growth stock. It has an EV/Ebitda of 8.5.
4. United Rentals (URI - Free Report) is the largest equipment rental company in the United States. When the economy is strong, so is this company. It has an EV/Ebitda of just 7.
5. Gilead (GILD - Free Report) , the biopharmaceutical giant, has been cheap for a while. It has an EV/Ebitda of just 6.3 and a forward P/E of 11.7. But is it a value trap?
Remember, the screen is just that, a screen.
Eveillard always had his analysts take a deep dive beyond the value fundamentals.
In today’s market, everyone has access to the same information including the annual reports, conference calls, presentations and press releases. For value investors, it’s really about how you use that information to find the hidden gems.
What other lessons can you learn from Eveillard?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of URI in her personal portfolio.]
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Lessons from a Legendary Value Investor
Welcome to Episode #105 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
This week, she finally gets to do an episode on one of the value investing legends: Jean-Marie Eveillard.
He ran the First Eagle Global Fund from 1979 to 2004 and was named Morningstar International Manager of the Year in 2001. Morningstar also gave him a Lifetime Achievement Award in 2003.
His First Eagle Global Fund returned 15.8% on average versus 13.7% for the S&P 500, according to Morningstar.
What are some of his insights after 50 years of value investing?
Value Investors Will Lag
Growth stocks have been on a tear. They have outperformed value for the last several years.
Eveillard saw this in the late 1990s as well. Back then, he didn’t buy tech or telecom, the two hot industries. His performance lagged that of the major indexes between 1997 and 2000.
During that time, his shareholders abandoned him. He has said 7 out of 10 shareholders in the fund left.
He said in a 2012 interview, “to lag is to suffer.”
Value investors suffer and that’s difficult. Most value investors can’t stand the pain of underperforming so they abandon ship. That’s why true value investors are rare.
It’s too painful for most investors to stay the course.
Look at the Balance Sheet
Value investing isn’t always just about finding cheap stocks, but it’s also about them being both cheap and safe.
Warren Buffett deploys the moat as a way of finding safety and then he adds on the cheap factor.
Eveillard has used the EV/Ebitda fundamental to screen for companies and then does a deeper dive. Many value investors like to use this metric because it considers the debt, which screening by using only the P/E or P/S ratios does not.
Screening for Value the Eveillard Way
Tracey screened for stocks with an EV/Ebitda under 10, which usually indicates value.
She added a forward P/E of 15 or under so there was a second value metric and then tacked on a Zacks Rank of #1 (Strong Buy) or #2 (Buy) in order to get rising earnings estimates.
Even with the narrow Zacks Rank, it returned 132 stocks.
That’s a healthy selection.
Here are five stocks from the screen that caught her eye.
5 Cheap Stocks Right Now
1. Sony has an EV/Ebitda of just 5. It just reported a solid quarter and is seeing real returns in its music content business that could pay off big in the coming years. It’s now one of the largest music publishers in the world.
2. Carrizo Oil & Gas is a small cap E&P with production in the Eagle Ford Shale and Delaware Basin in Texas. It has an EV/Ebitda of 8.
3. Intel (INTC - Free Report) shares have fallen 1.3% year-to-date as investors don’t seem to know if this is a value or a growth stock. It has an EV/Ebitda of 8.5.
4. United Rentals (URI - Free Report) is the largest equipment rental company in the United States. When the economy is strong, so is this company. It has an EV/Ebitda of just 7.
5. Gilead (GILD - Free Report) , the biopharmaceutical giant, has been cheap for a while. It has an EV/Ebitda of just 6.3 and a forward P/E of 11.7. But is it a value trap?
Remember, the screen is just that, a screen.
Eveillard always had his analysts take a deep dive beyond the value fundamentals.
In today’s market, everyone has access to the same information including the annual reports, conference calls, presentations and press releases. For value investors, it’s really about how you use that information to find the hidden gems.
What other lessons can you learn from Eveillard?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of URI in her personal portfolio.]
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>