Word: oakmark
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...margins. People need medicine no matter how the economy performs. But lately there have been worries over patent expirations and a slim pipeline of new drugs. So the P/E for some has slipped below the market. "Pills are cheaper than hospitals," notes Bill Nygren, manager of the value-oriented Oakmark Fund. He expects the group to return to above-market growth. Among the cheapest are Merck and Bristol-Myers Squibb...
...much money. It spent $7.6 billion last year in dividends and stock buybacks. At today's share price that's enough cash to self-fund a buyout over six years--a good indication the stock won't sink much lower and stay there. Robert Sanborn, manager of the Oakmark Fund, estimates that without raising prices or touching the dividend, Philip Morris could pay $10 million a day--$2.5 billion a year--without twitching. Oakmark has a large stake in Philip Morris (and a small stake of Kadlec dollars) and has doggedly held on to the stock, believing that...
Another flag is the aforementioned heavy redemptions. Take Oakmark Fund (which I own). After a brilliant run early this decade it has lagged badly the past two years. This year shareholders have withdrawn $2 billion more than they've put in, a drop equal to a third of the fund's assets, reports AMG Data. Manager Bob Sanborn has been forced to sell long-held stocks and realize the gain. "I'd be shocked if our distribution is not aberrationally high," he says. So don't buy now; it might even make sense to sell (I'm not) if your...
...yielding Dow stocks are Philip Morris (4.1%), J.P. Morgan (4.4%) and General Motors (3.5%). Other stocks to own might include those of consumer-products companies, a group that lost far less ground than the market this summer. You could also look for value-oriented stock mutual funds, such as Oakmark Fund (which has some of my money) or Mutual Shares (which has been carrying 20% in cash and thus was positioned to scoop up bargains as the market fell...
Spreading risk is prudent investment strategy. But the latest contingent of global explorers is less interested in diversifying risk than in chasing returns. Says David Herro, who runs the Oakmark International Fund: "It's almost scary what's happening today. They're shooting first and asking questions later...