‘Oracle of Tampa’ picks top 4 stock plays
The strengthening U.S. dollar has created a tailwind for four stocks, Jay Bowen of Bowen, Hanes & Co. said Monday.
"Really, you've got every major central bank around the world fighting the same battle," he said. "They're trying to vanquish these lingering … deflationary demons, and they're doing it with liquidity."
Last week, the Bank of Japan announced a stimulus program that sent U.S. stocks to all-time highs, with potentially more action from the European Central Bank this week, Bowen said.
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On CNBC's "Halftime Report," Bowen said that this was likely the first of two moves higher for the U.S. dollar.
"Our view is that this is a secular move, a secular bull market in the dollar," he said.
Bowen also added that it reminded him of the early 1980s "in terms of, I think, the first leg of this move is going to be for monetary reasons, and that's occurring now. The second leg, probably three to five years out, is going to be more for fiscal and regulatory policy reasons."
Bowen, who oversees $2.6 billion in assets as CEO and chief investment officer, posted a 12.7 percent return over 10 years, within the one percent of top performers among pension funds. He has been nicknamed "The Oracle of Tampa" by the investment community.
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A stronger dollar means cheaper energy, which is good for both consumers and businesses, he said.
"The market has basically been able to accomplish what the policymakers couldn't or would not do, and that is a multibillion-dollar tax cut for consumers and individuals," he said. "If we hang around here at $80, $85 a barrel, we're talking about in excess of $100 billion to the consumer. And it's also very meaningful for business in terms of lowering their input costs."
International Paper was one of Bowen's stock picks.
"I think they're going to benefit from lower raw materials costs, lower transportation costs," he said. "They also have tremendous free cash flow, and the company's been very focused on returning capital to their shareholders in terms of stock buybacks and dividend increases."
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Bowen also said that he liked the company's focus on North America, its $1.5 billion stock buyback plan and a dividend recently increased by 14 percent. Even with the stock's recent run-up, it still yields around 3 percent, he added.
Novartis and Nestlé were also among Bowen's favorites.
"I think it makes sense to look at European consumer-oriented companies that have strong North American revenues and earnings, and also that aren't too tied to European industrial production, which I think is going to continue to stagnate," he said. "So, if you can look at the consumer companies like a Nestlé or Novartis that also have good fundamentals and attractive dividends, they're going to really get a kicker, a tailwind, when they convert their earnings back into either euros or Swiss francs."
Lastly, Bowen said that he liked Leggett & Platt.
"It's a superbly managed company based in St. Louis, and they manufacture a variety of engineered products for the consumer and residential areas," he said, adding that 80 percent of its business is in North America. "Also, the other potential catalyst there is that I think they're going to be selling off their lower-margin businesses in 2015—for instance, the fixtures business—and redeploying that cash into higher-margin businesses."