The recent broad market sell-off of blue chips last week point to a buyer’s market, a fund manager said in an interview with CNBC’s Squawk Box.
David Herro of the Oakmark International Fund said the recent sell-off had paved the way for buyers to take advantage of the lower prices since the stocks that saw their prices going down still possess great intrinsic values.
“Frankly, what I am thinking is that price movements have been so much abruptly hit downwards versus the fundamental intrinsic value of businesses that it has become a true opportunistic market for true long term value investors,” Herro told CNBC.
“We are kind of buying everyday in bits and pieces but yes, as we see the price of quality businesses deteriorate much faster than our measurement of intrinsic value… In fact, in most cases intrinsic value hasn’t dropped, all these big picture things that we have mentioned, all these political issues at the end of the day, when you value businesses on free cash flow, the value of these companies has not dropped 10, 15, 20 percent and that provides an opportunity for long term investors,” Herro explained.
When asked which stocks he’s betting on, he especially noted Gucci as a good stock to buy, as many luxury stocks were down 15 to 20 percent due to the Asian slowdown. But rising affluence in the region could be beneficial to investors of the stock.
“Our review is that in the minimal long term, as more Asian consumers march from the middle class to the upper middle class, they want to buy this nice Gucci and Bottega Venetta goods (both under parent company, Kering SA). These are companies with extremely strong balance sheets, very good return structures, good free cash flow streams, that are down for cyclical reasons,” he said.
The broad market sell-off last Wednesday dragged major indices, plus majority of tech stocks down which is still unable to recover this week. According to a Nasdaq report, technology stocks edged lower with shares of technology companies on the S&P 500 dropping 0.2 percent before the end of trading day. Microsoft (-1.29 percent), IBM (-0.80 percent) and Cisco (-0.87 percent) trended lower Wednesday, while Apple (+1.00 percent) and Google (+1.79 percent) gained slightly.
Investors who want to do their bargain hunting elsewhere can buy tech stocks on other exchanges. Jonathan Yates, a staff writer on Benzinga, detailed attractively priced stocks that are on an upswing on the London Stock Exchange in his column. He recommended tech stock Audioboom (LSE: BOOM) as one stock that “can be good in diversifying plays” in an article.
Globally recognized as the “YouTube of Audio,” Audioboom has more than doubled its share prices from 5 GBX to 15 GBX following a reverse merger with One Delta. Arden Partners, an equity research firm and stockbroker in London, gives the stock a “Buy” rating and forecasts the stock to reach 14 GBX by the end of the year.
To buy into the British stock, Yates advised investors to open an account with a brokerage firm like Charles Schwab or Etrade.