Although one fund manager said he does not think equity prospects look particularly encouraging, he is finding value in an industry he formerly shied away from — technology.
“Eleven, 12 years ago, I would never have imagined myself owning Cisco Systems or Google or Microsoft , but, of course, what’s happened in the meantime is those stock multiples have compressed by 90 percent,” said Abhay Deshpande, First Eagle U.S. Value Fund portfolio manager. “They’re not at 150 times earnings anymore. They’re at 15 times earnings.”
Deshpande said he looks for companies with sound balance sheets, business models, and management teams along with good prices.
Among tech stocks, he said the difficulty lies in finding companies with business models that overlap with his fund’s long-term horizons, because tech companies often have short business cycles.
“If we’re talking about Cisco or Microsoft or Intel , these companies have such scale advantages that it allows us to kind of get more comfortable with investing there,” he said. “And, of course, the prices when we purchased them were quite reasonable, as well.”
Heading into 2012, Europe, Japan, and the U.S. will still serve as a difficult backdrop since stock markets around the world are down for the year.
“Although the prospects don’t look particularly encouraging, at least stock prices are reasonably valued,” he said.
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The First Eagle U.S. Value Fund holds shares of Cisco, Google, Intel and Microsoft.