Bill Nygren

Investors have been overpaying for dividend stocks while undervaluing companies that are buying back shares, Oakmark Fund’s Bill Nygren says.

Bill Nygren interview with CNBC embedded below

Transcript:

it’s always a stock picker’s market for you, isn’t it? that’s exactly what we do at oak mark. in fact, we do opposite from fast money as you can get. we’re taking positions that we expect to hold for at least five years unless the market gives us an opportunity to sell at full value earlier than that. what’s the fun in that? investing is not supposed to be fun. what are your good ideas right now? well, again at oak mark we try to find the names the rest of the markets isn’t excited about and gives us an opportunity to buy at value prices. sectors we like today would be financials, industrials, technology names, really the areas where there is been a lot of controversy and investors haven’t bid up prices. one of the things we think investors have gone excessive on is bidding up companies that pay high yields. we think it’s interesting that companies that have been large share repurchasers, it should be the same whether the money comes back as dividend or share repurchases but those stocks aren’t that expensive. it’s karen. i know you’re not a norm at fast money guest so happy to have you on. i know you have a big financials push. what are you hoping to get out of these stocks? is it sentiment changing? it’s already moved obviously but is it a price to book, price to earnings, how do you decide how long you’re going to hold on? you have bank of america, jpmorgan chase and capital one, correct? yes, we do. we like all of them. they are all large holdings. we see low pes. most of these companies sell at about 8 times the level that we think they’ll earn after the legacy mortgage costs stop going through the income statement. i saw the other day something that simplifies our financial position is that the return on equity for utilities and banks is 20 percent cheaper. most expect higher financial but they don’t expect in utilities. that’s an example of what we see of not paying enough for expected earnings recovery. apache, direct tv and hall burton are your picks. direct tv their share base is down 50 percent or so in the past four or five years. apache is telling assets at close to full net value, using proceeds to repurchase a stock that’s selling at a large discount to net asset value. even if you assume that their egypt operations aren’t worth anything, and we think they are. hall burton has announced a large tender offer, repurchasing four or five percent of their shares. that’s a really nice way to