Roy Neuberger, 99, says there are stocks to buy
By KATHERINE BURTON
BLOOMBERG NEWS
Saturday, July 27, 2002
NEW YORK -- Roy Neuberger, who began working as a stockbroker six months before the Crash of 1929, says many stocks are worth buying.
The 45 percent plunge in the Standard & Poor's 500 Index from its record two years ago doesn't herald the arrival of another Great Depression, said Neuberger, 99, who owns stocks such as Home Depot Inc., Johnson & Johnson, Merck & Co. and Alcoa Inc.
"I don't think we are in a depression at all," Neuberger said. "Business is spotty, but the housing industry is having a boom."
Neuberger counted Joseph Kennedy and financier Bernard Baruch as early clients and has seen war, inflation, recession and oil shocks in a 73-year career. The plunge in stocks is the flip side of the investing bubble that sent technology stocks soaring in the late 1990s, he said, just as the bear market of 1973 and 1974 followed the craze for Polaroid Corp., Xerox Corp. and other so-called Nifty Fifty growth companies at that time.
To be sure, this is just one man's opinion. Loews Corp. Co-Chairman Laurence Tisch, a 79-year-old stock picker who has been correctly bearish on the market, no longer suggests selling stocks. He's not touting them, either. "I'm not recommending anything today," Tisch said. "I'm neutral."
Nelson Peltz, 60, who has bought and sold companies since 1963, also doesn't view the decline in stocks as a buying opportunity. "I still don't see much that's not overvalued," said Peltz, chairman and CEO of Triarc Cos., which operates Arby's restaurants.
Neuberger founded the money management firm Neuberger Berman Inc. in 1939. Although he no longer invests for others -- and stopped driving a car almost two decades ago -- he still goes to the office most days, buying or selling at least one company for his own 20-stock portfolio.
Neuberger, a value investor, looks for inexpensive companies relative to their earnings and said his biggest industry bet now is on oil stocks. He said he owns ChevronTexaco Corp. and Exxon Mobil Corp. because they are inexpensive, trading at 13 times and 18 times recent earnings, respectively. The average company in the S&P 500 sells for 31 times earnings.
He has sold short shares of retailer Wal-Mart Stores Inc. and consumer-products maker Procter & Gamble Co., betting they will tumble.
"They are huge companies, but they aren't worth the multiples," said Neuberger, who made it through the crash of 1929 by shorting Radio Corp. of America. Wal-Mart sells for 30 times recent earnings, and Procter & Gamble has a price-to-earnings ratio of 25.
In a short sale, an investor sells borrowed shares, hoping to buy them back at lower prices. The seller returns the stock to the lender and pockets the difference between the sale and repurchase prices.
Neuberger would be interested in buying financial stocks, he said, if it weren't for the troubles of Citigroup Inc. and J.P. Morgan Chase & Co. The Securities and Exchange Commission is investigating whether both companies helped bankrupt energy trader Enron Corp. hide debt.
Although other investors with decades of experience aren't so bullish, many no longer are outright sellers. Loews Corp.'s Tisch, for example, has moderated his view since June, when he advised selling stocks to buy bonds -- and saw the market shed 20 percent.
"The market is less risky than it was when it was 40 percent higher, but it's still risky," said Tisch, a billionaire whose company owns tobacco, insurance, oil drilling and hotel businesses.
Neuberger, a resident of Manhattan's Pierre Hotel, is willing to admit he may be wrong. He's been right about 70 percent of the time, he said, "but I make lots of mistakes."
One mistake was buying AOL Time Warner Inc., which has plunged 72 percent so far this year. "I thought it was a fine merger," he said. "It didn't turn out that way."
Neuberger's advice to investors is fairly simple. " I think the average person should be 50 percent in stocks and 50 in government bonds, and not owe money," he said. "If you own a home, you should be paying off the mortgage."
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