by Michael Tarsala
You gotta love stocks right now.
What other asset class is there to love?
Equities are simply the “best house in the financial asset neighborhood,” said Leon Cooperman, chairman of Omega Advisors, self-made hedge fund billionaire and one of the thought leaders of value investing, in a story that ran in Investment News.
Cooperman notes that the S&P 500 is trading at 12.5 times earnings, a discount to the average multiple of 15 over the past 50 years.
He acknowledges employment worries, trouble with Europe’s economy and uncertainty about the U.S. presidential election.
Yet he also says U.S. banks are stonger, household debt is down and companies are still boosting their capital spending — the latter of which is one of the main arguments of Bob Gay, manager of the Earnings Surprise model.
Cooperman still expects stocks to churn out an average return of 7 to 8 percent going forward. That’s below their historic average of 10%, but a heck of a lot better than what might be expected from the bond market.
Bottom line, it’s a stockpicker’s market. Cooperman’s strategy is to look for low PE stocks with strong cash levels that trade at a book value discount. He also wants to own companies that are buying back their own stock at a discount.
Read the whole story for his picks, including Apple (AAPL) and SLM Corp. (SLM).
