(October 11 – 18: 10 ET) – With tech stocks taking a thumping, perhaps now is a good time for an “I told you so” missive from ABC Funds how of value investing guru Irwin Michael.
In ABC’s October report, Michael warns that many investors, fund managers and analysts have abandoned good old fashioned analysis to chase pricey tech stocks. The result, he argues, is a crop of beaten up stocks waiting for a catalyst to set them off. He points to takeover target Crestar Energy as an undervalued stock that has taken off because a strategic buyer finally recognized its value. “There are many undervalued common shares, like Crestar, in today’s market place. They are dirt-cheap and they are languishing. They are ripe for a merger, takeover, reorganization or privatization. Any type of catalyst could catapult their price upward. The key to successful investing is the combination of discipline and patience.”
The report also says that the shock from rising oil prices will enforce a slowdown to more sustainable growth rates. “While we expect positive economic growth, we believe that investors and business planners will have to recalibrate their expectations and reduce their economic outlook to more realistic levels.”
In the meantime, ABC says cash is king once again. It notes that with T-bill rates above 5% and techs looking mighty volatile, it has been selling winners, and loading up on cash in order to buy later in the fall. ABC has raised cash levels to almost 15%. “We view this as a temporary measure and expect to opportunistically deploy this liquidity during any extended market weakness in October, November or December.”
Among financial services issues, ABC likes: Laurentian Bank, Surrey Metro Savings, MFP Financial Services and Dundee Bancorp.
-IE Staff