Investing

Bill Nygren: Cummins, Anadarko good value stocks

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Investors seeking value plays should look at these two stocks: Anadarko Petroleum and Cummins, a power generator manufacturer, Bill Nygren said Wednesday.

"Anadarko takes advantage of the fact that most of the oil companies, especially the [exploration and production] shale companies in the United States, isn't very profitable if oil stays between $40 and $50 a barrel," the manager of the Oakmark Select Fund told CNBC's "Fast Money: Halftime Report."

Nygren added he expects the price of oil to rise back to about $70 per barrel, thus making the company even more profitable. U.S. crude has fallen over 40 percent in the last year and about 20 percent in 2015.

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WTI crude in the last year


Regarding Cummins, Nygren said, "It's pretty easy to live with a stock like Cummins, which sells at about 10 times expected next year's earnings.

"Yes, there's a little risk if emerging markets go into a recession that they'll miss that number, but you get a 3.5 percent dividend yield and a company that will benefit from global growth," he said.

Anadarko's stock was up more than 1 percent midafternoon Wednesday, while Cummins was slightly lower.

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Bill Nygren
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Nygren also discussed the fall of Wal-Mart's stock, saying: "As the price keeps coming down and starts to be valued more like a structurally disadvantaged company, we get very interested in it, but it's not something we own right now."

Wal-Mart shares plunged Wednesday, recording their worst day in 15 years.

"Structurally, when we look at the industry, we consider bricks-and-mortar stores to be at a disadvantage relative to online retail," he said.

Disclaimer

Disclosure: Oakmark Funds holds at least 1 percent in both Anadarko's and Cummins' stocks as of Sept. 30, but does not own any Wal-Mart stock.