00:00 Speaker A
How should investors be digesting this latest market action and really the volatility that we’ve seen?
00:08 Speaker B
Well, they should be embracing volatility. You know, volatility is the friend of the buyer of long-term value. And, you know, we had this, we have had this massive rebound, um, you know, 20% up. We really did have a bare market intraday, April 7th, April 8th. Um, we did get down more than 20% from the highs. And so, hopefully investors have learned that stocks have proved rewarding over the long haul. They just have to have the patience and discipline to stick with them through thick and thin.
00:59 Speaker A
So there’s been a lot of talk of diversification, investing overseas, looking out for opportunities. How do you identify those undervalued pockets of the market and where are they within this current environment?
01:13 Speaker B
Sure. Well, it’s, it’s, you know, it’s a market of stocks and not simply a stock market. So while, um, the major market averages are now in the black for the year, there are still many stocks that are down. Um, believe it or not, and the average stock in the Russell, uh, uh, 2000, you know, index is down significantly. So, you know, we are a value oriented shop at the Prudent Speculator. We look to buy things that are on sale. Um, you know, try to take advantage of that downside volatility. Things tend to go to extremes. You know, investors get infatuated with certain stocks and then they’ll, of course, abandon other companies because sometimes there are short-term issues, um, or they’re just not in a space that investors are attracted to today. So today we, you know, we like things in the energy sector because energy stocks have been, been hit pretty hard. You know, a name that I think is attractive is Civitas Resources, probably one of the hardest hit. They’re an oil and gas producer. A big dividend yield, um, low PE, they’re still very profitable even at current, um, energy price levels and they’ve been very shareholder friendly in buying back stock and, and paying us a, a giant-sized dividend. Um, also we’ve seen things like in the pharmaceutical area, a company like Merck, which we view as very high quality. Um, trading at a PE around 11 today with a dividend yield of 4%. And, you know, historically Merck trades for a much higher valuation, uh, level. Uh, happy to go through others if you’d like or we can, uh, I’ll wait for, uh, your, your cue.
04:15 Speaker A
No, yes, because you have five stocks that you like, you hit two out of the five. So what are some of the other names?
04:25 Speaker B
Sure, well, you know, again, um, lots of things have done very well this year. You know, we own Oracle, which has had a great day, uh, today. So when I come on, on the airways, I like to talk about things that haven’t had, had their day in the sun. So something like Whirlpool, which is the appliance maker, uh, there your yield is over 7%. Uh, PE is in the 9-10 range and again, we do think that interest rates will be coming down later in the year and that will support, uh, housing and that a stock like Whirlpool, this is the time you want to take advantage of it before all of that has happened. Um, another, uh, stock that has struggled mightily is Target, you know, the big discount retailer. Here again, you have a very low valuation relative to where it historically trades and a dividend yield that’s, uh, pushing 5%. And then a final stock would be UPS, which is the package, uh, shipping company. Again, the, the theme here is, is low valuations and generous dividend yields. And in a market where the S&P 500 is, you know, trading at 23 times forward earnings, our portfolios traded at 14 times, uh, forward earnings. And then our dividend yield on our portfolio, overall portfolio is 2.5% versus 1.3% for the, uh, for the S&P 500. So I think you can be selective in this market. I do think that, that stock picking is, is going to be much better going forward than, uh, buying the indexes, um, and it, it certainly helps us sleep better at night with reasonable valuations and generous dividend yields on our stocks.
