Portfolio Managers Seek Value in 'Everyday' Companies
Special to CNBC.com
There's nothing better for a value investor than a company making products people need every day—and whose stock is cheap. John Buckingham, chief portfolio manager for Al Frank Asset Management, sees that in Cooper Tire.
"We’re always focused on valuations," he told CNBC Thursday. "Cooper’s trading at an inexpensive multiple of earnings, less than 10. You’ve got a dividend yield here of over 2 percent and they’re in the replacement tire business."
The increasing cost of material is a big issue, he said, but Cooper has managed to pass some of those costs on, through price increases.
"I think you’re going to see earnings growth over the next couple of years, and boy, I like buying dividend-paying undervalued stocks in this kind of a market," Buckingham said.
His other picks are Freeport-McMoRan and Whirlpool .
In the same interview, John Dorfman, a longtime bull, thinks "we are in a real recovery" and one stock that will benefit is Lam Research . The company's "earnings are probably doubling this year, [and it's] selling for only seven times earnings."
Dorfman, portfolio manager for Thunderstorm Capital Value Fund and Dorfman Value Fund, said his other picks are Amedisys and General Dynamics. They are undervalued, he said, because "I think people have gone overboard on the worries."
On General Dyamics , for instance, people are worried about cuts to the U.S. defense budget. But "I think there’s a limit to how much we can cut it in an unfriendly and uncertain world," Dorfman said.
The company has had "10 straight years of profits, including nine out of 10 up. They have a history of surviving previous budget battles, so I think they’ll do better than people expect."
CNBC Data Pages:
John Buckingham owns shares of FCX, WHR and CTB personally and via ownership of his mutual funds.
John Dorfman owns shares of GD, LRCX and AMED personally and for clients.