Charles Bobrinskoy, Ariel Investments, and Harry Hartford, Causeway Capital, discuss stocks they feel are now cheap enough to buy in this down market.
talk us through you like american. you also like a name like citigroup and some of the financials. is that right? that is correct. as it relates to american, there’s obviously been a lot of consolidation in the industry, so the capacity addition was quite modest. there are elements of pricing power in the different business models that they have in place. fuel remains supportive, and in general what i would say is that there’s a lot of operational leverage which will lead to significant improvement in profitability and it’s not unique to american airlines. it’s common in the u.s. industry and to some extent common in the european industry as well. and we’ll get to the financials in a second. charlie, what about you? you look at the sell-off here and are you using this opportunity to pick up some names on the cheap? we tend not to worry too much about short-term moves. this is a 5% move, it’s not a big deal but we have looked at sector that is have been left behind and stocks that have been left behind and there were some high quality energy names in particular. nov is a leader in drilling equipment, floating rigs, and it’s got a book to build ratio of 1.4 trading at less than 12 times earnings. we’re very excited about nov. all right. i see a couple other names up there, including microsoft. that’s an interesting one. do you like the naming of nadella as ceo here? yeah. the thing about microsoft, my kids yell at me all the time when i say i own the stock because they don’t like the consumer products, but it’s an enterprise company. if i told you over the last ten years that microsoft’s earnings have almost quadrupled from 75 cents a share to almost 3 bucks, most people wouldn’t believe that, but they have. sales have more than doubles over the last ten years. so it’s not that the company is having problems. it’s that the stock was overpriced ten years ago. it’s not overpriced now. it’s actually a very attractive stock.