Top value manager Bill Nygren says he's still finding a bunch of stocks that are really cheap

Published Wed, Oct 13 202111:58 AM EDT

Top value investor Bill Nygren said on Wednesday he believes there are plenty of opportunities for bargains in the market, especially in the banking and energy sectors. "I just don't think there's a strong argument against equities," Nygren said on CNBC's "Squawk on the Street." "Within the equity market we still view it as kind of two tiered," he added. "There are a bunch of stocks that are really cheap, such as financials and energy, and then a bunch of stocks that are really expensive. I think the cheap stocks are cheaper enough that a value portfolio today looks pretty typically valued." Oakmark Funds' Nygren is one of the best-performing value-focused fund managers on Wall Street with decades of experience. He has been the manager of the Oakmark Select Fund since 1996 and the Oakmark Fund since 2000, both of which have doubled in the past year and outperformed the broader market. In terms of the financial stocks that Oakmark owns, Nygren likes Ally Financial and Citigroup. "I think the banks are really cheap despite them having been good performers over the past year," said Nygren. Ally Financial "was a horrible stock into the early part of the pandemic, but it has a really strong recovery," said Nygren. After rallying roughly 47% in 2021, it is selling at about 8x expected earnings, he added. Oakmark is also a buyer of Citi, which has rallied about 13% this year. Nygren said Citi's CEO Jane Fraser is doing a great job of rebuilding the corporate culture and refocusing on the customer at the major bank. He said he believes that stock could double its return on equity in the next five years. While rising interest rates are a growing concern for many investors, Nygren said a jump in bond yields would help financial stocks and also boost commodity prices, which would in turn support the energy sector. A handful of major tech names have also attracted Nygren's attention. "We've got a more somewhat inclusive definition of value, adjusting GAAP accounting for what I refer to as deficiencies," said Nygren. "So we own names like Facebook , Alphabet and Netflix because we think they're cheap relative to business value. That's been a large part of the strength in our portfolios."

Citi's bank branch in the central business district of Singapore on Feb. 12, 2018.

Ore Huiying | Bloomberg | Getty Images

Top value investor Bill Nygren said on Wednesday he believes there are plenty of opportunities for bargains in the market, especially in the banking and energy sectors.