I have CHTR and agree it is undervalued.
Friday April 28, 9:00 am Eastern Time
Individual Investor
Scott Black's Value Favorites
Analyst: Bob Hirschfeld (4/28/00)
The fact that Scott Black, an old school value manager is shellacking the major market indexes may offer some insight about how investor sentiment is changing amid the recent tech stock gyrations. Right?
Not necessarily. Black feels a number of investors may still be pre-occupied with growth and technology's past achievements, and are chasing last year's top mutual funds, many of which are now losing money, and ignoring value funds. ``Right now, nobody cares,'' says Black, manager of the Kobren Delphi Value Fund (NASDAQ: KDVRX - news)
Through Wednesday, the technology-laden NASDAQ Composite was off 10.79%, the S&P 500 Index was down 0.56%, and the Dow Jones Industrial Average was down 4.8%. Contrast those numbers with the famed value manager's Kobren Delphi fund, which during the same period returned 6.8%.
Black is a disciplined value investor who buys stocks with low P/E (price-to-earnings) and price-to-book ratios, and maintains, whenever possible, a bias toward small cap stocks, which history has shown tend to yield higher returns. Commenting on the current carnage in technology stocks, Black doesn't gloat. ``Tech is not dead, but you've got to be very selective,'' he says. ``It's not as though people got religion these past few weeks. They're still going out and buying stocks with 100 multiples on them, like Sun Microsystems (NASDAQ: SUNW - news) and Oracle (NASDAQ: ORCL - news),'' he adds.
Right now, the kind of technology stocks Black favors includes companies like Avnet (NYSE: AVT - news) a distributor of computer products and semiconductors, which trades at about 14 times next year's earnings.
Black said, since the fourth quarter, he had been about to sell between 50% and 100% of all of his tech positions. The manager added, ``We've been able to avoid the high flyers,'' noting that he had avoided the Internet entirely and ``kept away from the Sycamores (NASDAQ: SCMR - news) and the JDS Uniphases (NASDAQ: JDSU - news).''
Referring to the battering that tech stocks received, Black said, ``Fortunately we escaped all of that.''
Black noted that he recently sold most of his position in Applied Materials (NASDAQ: AMAT - news), the maker of semiconductor fabrication equipment, and KLA-Tencor (NASDAQ: KLAC - news), which makes semiconductor-monitoring systems. ``Those we're selling into strength.''
One tech holding that still draws Black's value-oriented admiration is Intel (NASDAQ: INTC - news), though the manager added, ``that's a position we got into a few years, ago, about the time they came out with the Pentium II chip.'' Black has also warmed to three mid-size manufacturing companies in recent weeks: Ingersoll Rand (NYSE: IR - news), the maker of construction equipment, which Black recently bought at $41 per share; Emerson Electric (NYSE: EMR - news), the diversified electronics manufacturer, which he started buying in the $43 range; and Textron (NYSE: TXT - news) a multi-industry company, which Black has been buying in the mid-$50s.
Another sector, though one that Black finds unaccountably under appreciated, given its strong prospects, is media, a long-time favorite. Here, Black says his recent buys are Charter Communications (NASDAQ: CHTR - news), Paul Allen's cable TV company, which at a recent $15 per share is well below comparably sized cable operations, and Barry Diller's cable enterprise, USA Networks (NASDAQ: USAI - news), which owns Home Shopping Network, Ticketmaster, and the Internet Shopping Network. ``(USA Networks) is down to $18 per share and we're buying in here,'' says Black.
Black also likes information services stalwart McGraw-Hill (NYSE: MHP - news), ``It's now trading at $40 and nobody cares,'' Black says, and publisher Central Newspaper (NYSE: ECP - news) which offers a low double digit P/E ratio and, Black notes, trades between 5 and 6 times next year's cash flows.
In the financial sector, Black favors Comerica (NYSE: CMA - news) a diversified financial services holding company that sports a P/E multiple of 9 times, comfortably below its growth rate of 11%, and Fleet Boston Financial (NYSE: FBF - news), which provides retail banking and investment management and trades at a 10 multiple, well below its estimated 13% growth rate.
Bottom Line:
Value investors already know the name Scott Black, and fund investors who are wary of the volatility, if not the outright losses, of their technology-laden funds might consider investing alongside Scott Black, whose disciplined approach to investing keeps him from chasing the high flyers. |
