After investors seemed to agree with our earlier post that the October jobs report was not enough to rescue markets, stock prices once more headed south. However, one of the most respected value investors of the last 20 years, Bill Miller, made a comment that seemed to grant a temporary reprieve to the markets.
Miller stated that, over the next 5 years he believes that financial and housing stocks will likely benefit the most (as they have been depressed due to current market conditions in credit and housing). This helped bring back shares of stocks such as Merrill Lynch (NYSE: MER) and CitiGroup (NYSE:C).
In my opinion, he is absolutely right - just like technology stocks, people will avoid them like the plague out of irrational fear for some time. And, like a true value manager, I’m sure Miller will be waiting until they fall about 20% below intrinsic value before he snaps them up and rides them (slowly) back up to the top.
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One Response to “Why Do Value Investors Rock? Two Words: Bill Miller”
By blaize sondej on Nov 3, 2007 | Reply
I agree with Miller on some of the better next sectors for value investors, BUT imho it is still early. Check your history on the last banking crisis, for example, Signet Bank which dropped to below $12 per share before recoving and a couple of years later was bought out around $70 had a few false starts. His widely published statements will probably give a bounce to these sectors and/or specific stocks next week but the protfolio cleansing for this year is not yet over and may in fact carry over to early next year. I plan to watch the technicals on these and expect at least one more drop before there is some semblance of a base. After Europe and a few of the emerging countries take a hit due to our impending short lived recession and the dollar starts to rebound as the other central banks respond with interest rate cuts of their own, gold breaks down, and oil stalls out, and the reality sinks in that the war on terror is winding down the time to buy and on margin will have arrived.