- (0:30) - Navigating A Volatile Market
- (4:50) - Investing in Gold and Reality: Beating Inflation
- (13:45) - Learning From Past Secular Bull & Bear Markets
- (24:55) - Tracey’s Top Stock Picks: Finding Value In Down A Down Market
- (33:30) - Episode Roundup: GLD, VNQ, PVH, GIII, GT, M
Welcome to Episode #154 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
This week, Tracey continues with her series looking at Benjamin Graham’s best-selling book for value investors called “The Intelligent Investor.”
First published in 1949, the last edition by Graham was published in 1973. But in 2003, Jason Zweig, along with a preface by Warren Buffett, updated the book to account for the events of the last 40 years.
Investing and Inflation
Graham covers inflation and the history of the stock market in chapters 2 and 3 of the book.
While there isn’t much inflation to speak of in 2019, that hasn’t always been the case. From 1915-1920 the cost of living nearly doubled.
The US also saw its worst decade of inflation in the last 100 years in the 1970s as inflation had an annualized rate from 1973 to 1982 of nearly 9%.
How can Investors Protect Their Portfolios from Inflation?
- Gold is back in vogue. Back in the 1970s, you literally had to buy gold coins or bars and stack them in the closet. But in 2019, there’s the Gold ETF (GLD - Free Report) which trades on the physical gold. Year-to-date it’s up 17.7%, outpacing the S&P 500 which is up just 13.3%.
- Graham also talks about real estate investment trusts (REITs). ETFs are also a good way to get diversity in real estate investments. The Vanguard Real Estate ETF (VNQ - Free Report) , for instance, has an expense ratio of just 0.12% and pays a dividend yielding 3.4%. It’s invested in 189 different real estate stocks.
Can the Stock Market’s Past Predict the Future?
Graham cautions about looking to the past to try and figure out the future. No two market cycles are the same. And an overvalued market may stay that way for far longer than you think.
For example, stocks were already considered expensive in 1995 when they went on their 20% annualized a year hot streak that ended in 2000.
Remember Chairman Greenspan’s speech talking about irrational exuberance? That was in 1996.
Graham’s Question of “How Much?”
How much are you willing to pay for shares in that company?
That’s the question Graham says investors must ask.
Right now, many stocks have plunged to new 52-week lows. Some are at multiyear lows. It’s time for value investors to start looking underneath the rubble and asking Graham’s question: how much?
Value investors buy when everyone else flees. No one says it’s easy.
3 Stocks on Sale in 2019
- PVH (PVH - Free Report) hasn’t yet reported earnings but shares have sunk 25% year-to-date and are near 5-year lows last seen in 2016’s dark time for the retailers. PVH has big department store and China exposure and that has made investors nervous. But it’s dirt cheap again with a forward P/E of just 7 and a PEG of 0.6.
- G-III Apparel (GIII - Free Report) owns the Donna Karan, DKNY, and Karl Lagerfeld brands, among others, and is also a big supplier to the department stores as well as its own retail stores. It hasn’t yet reported earnings either but shares are down 24% year-to-date and now trade with a forward P/E of just 6.98. The earnings growth is there, with a PEG of 0.7.
- Goodyear Tire & Rubber Company (GT - Free Report) is down 44% year-to-date and is at new 5-year lows. It’s trading with a forward P/E of just 7.7 and pays a dividend yield of 5.4%. It’s a Zacks Rank #5 (Strong Sell), however, as estimates for 2019 and 2020 have been cut in the last 30 days. Is it a value trap?
What else should you know about stocks being on sale?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey currently owns shares of GIII in her personal portfolio.]
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