Latest / Bloomberg Intelligence / AAM's Colyer on Equities: Avoid Defensive and Expensive (Audio)

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AAM's Colyer on Equities: Avoid Defensive and Expensive (Audio) · Bloomberg Intelligence

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  Speaker 1: Texas Enemydia Crude. I'm Charlie Pellett, and that's a Bloomberg
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  Speaker 1: business flash. You're listening to taking stock with Bimbox and
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  Speaker 1: Kathleen Hayes on Bloomberg Radio. Value investing versus growth investing.
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  Speaker 1: Some of those growth stocks we know, such as Alphabet, Facebook, Amazon,
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  Speaker 1: and Netflix. Well, that was maybe last year's story. Here
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  Speaker 1: to tell us about what might be this year's story
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  Speaker 1: and value is Scott Collyer. He is the chief executive
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  Speaker 1: officer and the chief investment officer of Advisor's asset management,
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  Speaker 1: helping to manage more than sixteen and a half billion
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  Speaker 1: dollars of customer assets. Scott, thank you very much for
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  Speaker 1: being with us. How do you define a value investor?
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  Speaker 1: I think a value investor looks uh for um intrinsic
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  Speaker 1: value or more historical value and rise to to um
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  Speaker 1: the spot um asset classes that might be out of favor,
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  Speaker 1: but but there's some sort of a catalyst that might
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  Speaker 1: bring them back in favor. There. You know, the value
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  Speaker 1: investor that got stuck buying buggy whips waited a long
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  Speaker 1: time because there was really never a catalyst to to
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  Speaker 1: bring those back. So I think what we look for
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  Speaker 1: is is we look for not only value, as in
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  Speaker 1: the asset is cheap. But is there a catalyst that
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  Speaker 1: would bring it back into vogue. I thought you were
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  Speaker 1: going to tell me it's being unpopular because the value
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  Speaker 1: investor has been unpopular for quite a while. They have,
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  Speaker 1: but sometimes you don't want to admit that about yourself.
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  Speaker 1: So it may be unpopular. But but I tried to
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  Speaker 1: define it in a nicer way. Well done. Tell us
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  Speaker 1: about defining some of the areas that value investors ought
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  Speaker 1: to look for for returns? Well, I think some of
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  Speaker 1: the places where where we would we would spot value
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  Speaker 1: today a would you know, in the US markets, we
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  Speaker 1: continue to look at, you know, energy and materials, even
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  Speaker 1: though they've had a good first half of the year.
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  Speaker 1: We would submit that after a very long bowl excuse me,
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  Speaker 1: bear market, especially for materials, being about four years in length.
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  Speaker 1: Generally those trends take a long time to play out
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  Speaker 1: to the upside, just like they do the downside. We
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  Speaker 1: think that there's a a global growth uh cycle that's
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  Speaker 1: just beginning, and quite frankly, there's been no new deposits
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  Speaker 1: of this stuff found over the last few years because,
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  Speaker 1: quite frankly, it hasn't been profitable to drill or dig
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  Speaker 1: for them. So I you know, we we continue to
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  Speaker 1: like those we've seen the catalysts begin to bring prices
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  Speaker 1: up that we think there's a long way to go there.
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  Speaker 1: On a more global basis, I think places that right
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  Speaker 1: now are are hated the most, maybe like Europe, uh
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  Speaker 1: England even in the Brexit vote, as well as Asia,
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  Speaker 1: we think those are areas that provide a lot better
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  Speaker 1: value than we find in many of the the you know,
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  Speaker 1: the US based companies, And we would suggest that there's
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  Speaker 1: catalysts there in the fact that there's huge amounts of
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  Speaker 1: liquidity available at historically low prices, and generally governments that
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  Speaker 1: are trying to be quite supportive of economic growth. I
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  Speaker 1: wonder if you could just expand a little bit on
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  Speaker 1: the concept of intrinsic value, because if you buy a stock,
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  Speaker 1: it is possible you always run the risk at the
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  Speaker 1: coming cope go out of business and you'd be left
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  Speaker 1: with nothing. But in the case of an asset such
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  Speaker 1: as a barrel of oil or a bar of gold,
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  Speaker 1: you still have that physical asset. Does that change the
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  Speaker 1: way you look at the investment, Well, I think it
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  Speaker 1: changes the way you look at it at the very
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  Speaker 1: fundamental base and that I'm not sure what you do
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  Speaker 1: with a barrel of oil. I'm not really sure what
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  Speaker 1: you do with a bar of gold, But folks that
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  Speaker 1: mind them and folks that drill for them basically bring
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  Speaker 1: them up to the surface and sell them, hopefully at
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  Speaker 1: a profit. So at the end of the day, you
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  Speaker 1: can buy gold as a currency replacement, or you can
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  Speaker 1: buy a gold miner that potentially has an enterprise that
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  Speaker 1: would throw off profits and potentially have some growth. I'm
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  Speaker 1: not a big fan of trying to to play the
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  Speaker 1: commodity itself because quite frankly, um, there's there's a number
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  Speaker 1: of things that can happen to the commodity that you
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  Speaker 1: would have no control over whatsoever, even though you can
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  Speaker 1: buy gold coins and stick them in your mattress and hopefully,
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  Speaker 1: unless you're robbed, they'll still be there tomorrow. I think
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  Speaker 1: the way that we look at it is after you've
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  Speaker 1: gone through a prolonged time period when depleting assets have
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  Speaker 1: not been replaced, such as oil, gold, iron ore, and
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  Speaker 1: you have demand that is rising for those which we
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  Speaker 1: currently do have, then the scarcity value, the price of
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  Speaker 1: that has to rise to the point of where people
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  Speaker 1: will go out and try to find more. So once again,
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  Speaker 1: it's it's really a traditional cycle. Pan It's not something
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  Speaker 1: that's you know, that's popular right now. These are long
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  Speaker 1: dated commodity cycles and they have happened, you know, over
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  Speaker 1: the over the years and decades before. It's not really
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  Speaker 1: anything new. Well, you mentioned that word popular again, and
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  Speaker 1: I just want to pick up on that, because sometimes
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  Speaker 1: it's difficult to invest in things that are unpopular. But
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  Speaker 1: in your experience, is that where real money is made? Well, I,
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  Speaker 1: speaking for me personally, I think that's where real money
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  Speaker 1: is made. I quite frankly, I don't have the ability
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  Speaker 1: to understand some of the valuations that might surround things
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  Speaker 1: that are that are popular that have no history to them.
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  Speaker 1: I do understand what happens when you have economic cycles,
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  Speaker 1: and when you have a building cycle or a car
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  Speaker 1: buying cycle. Those things tend to happen over and over.
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  Speaker 1: So at least speaking for myself, that that is the
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  Speaker 1: part of the you know, the investment spectrum that we
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  Speaker 1: choose to to exist. And so I think we can
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  Speaker 1: make money here. I'm not sure that I could make
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  Speaker 1: money elsewhere, but but we make money in in this fashion.
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  Speaker 1: What don't you like, Scott, I think I don't like
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  Speaker 1: things that are defensive and expensive, right, and so if
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  Speaker 1: you take a look at both of those, um, you know,
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  Speaker 1: long dated sovereign debt would be right at the top
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  Speaker 1: of my mind. Any time that you have historically high
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  Speaker 1: demand for an asset class where the expected returns are
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  Speaker 1: the lowest on record, I think we normally call that
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  Speaker 1: a bubble. And I'm not trying to say we're in
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  Speaker 1: a bond bubble. I'm just saying that historically were places
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  Speaker 1: we've never been before with negative yields, and generally speaking,
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  Speaker 1: capital does not sit comfortably in a place where it
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  Speaker 1: is going to be destroyed, even if it's just a
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  Speaker 1: little by little over time. The second place are more
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  Speaker 1: defensive areas, and we've seen kind of a run up
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  Speaker 1: at the last half of two thousand and fifteen the
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  Speaker 1: first half of this year in utilities and consumer staples,
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  Speaker 1: so you know soap makers and uh, you know, soft
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  Speaker 1: drink makers. I think that those valuations on a historical
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  Speaker 1: basis are stretched to their highest. So I think I
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  Speaker 1: would want to I would want to be turning down
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  Speaker 1: or decreasing my allocation to those areas and try to
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  Speaker 1: increase allocations to UH not only UH materials, energy, but
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  Speaker 1: also industrials and put costs er or down the consumer
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  Speaker 1: discretionary which they've had a hard time over the past
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  Speaker 1: twelve months. But I think we're beginning to see a
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  Speaker 1: turn in that we've got a very healthy consumer. Once
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  Speaker 1: they decide to start buying a little bit more, I
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  Speaker 1: think it will have a huge difference, UH in the
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  Speaker 1: price of the consumer discretionary area. How about the price
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  Speaker 1: of emerging market assets, well, emerging market many of them
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  Speaker 1: UM and if you know, we're talking maybe Eastern Europe,
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  Speaker 1: we're talking parts of Asia, mostly Latin America. A lot
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  Speaker 1: of those countries, their fortunes are tied to what they produce.
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  Speaker 1: And since commodities that kind of bounced, you know, to
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  Speaker 1: the first six months of the year, we've seen emerging
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  Speaker 1: markets bounce as well. In the In the case of
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  Speaker 1: Latin America, we've seen a number of governments change. We've
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  Speaker 1: seen the government in Argentina changed to a very pro
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  Speaker 1: business stance. We're seeing Brazil, besides the Olympics, we're seeing
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  Speaker 1: President russaf has been impeached. She is out of office
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  Speaker 1: for six months. While she's put on trial. But essentially
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  Speaker 1: we're seeing the Brazil at the very end of of
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  Speaker 1: a historically long u bear market and a very brutal
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  Speaker 1: recession that they've they've uh they're trying to overcome. I
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  Speaker 1: would expect them to come out with a much more
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  Speaker 1: pro business attitude. Venezuela may collapse any day, but this
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  Speaker 1: is changed for the better. This is not changed for
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  Speaker 1: the worst. It's actually changed for the better. We would
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  Speaker 1: argue it's at the end of a very long bear market,
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  Speaker 1: it's not at the beginning. We would we would continue
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  Speaker 1: to put assets there if you're looking for income. We
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  Speaker 1: think emerging market debt is in great shape, and I
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  Speaker 1: think if you can stand the volatility, emerging market equities
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  Speaker 1: are just in the very first innings of their bowl market,
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  Speaker 1: where one might argue that the United States is in
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  Speaker 1: maybe the latter number of innings in our bowl market.
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  Speaker 1: Scott Collyer he is the chief executive officer and the
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  Speaker 1: chief investment officer of Advisor's asset management, helping to manage
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  Speaker 1: more than sixteen and a half billion dollars of customer assets.
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  Speaker 1: He's staying away from what he describes as the defensive
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  Speaker 1: and expensive We're gonna take you through to the clothes
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  Speaker 1: on Wall Street. This is taking Stock. I'm pim Fox.
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