Oxford Club Radio: Alexander Green on Value Investing
This week on Oxford Club Radio, Marc interviews Alexander Green. Investment U readers know Alex from his regular contributions here. He’s a veteran Wall Street analyst, renowned financial commentator and author of The Gone Fishin’ Portfolio (and other best-sellers).
In this clip, Marc and Alex discuss how to find value in today’s market. It’s a challenge in the current investment climate, as many stock indexes are near all-time highs.
As Alex explains, value investments are still out there. You just have to look beyond the broader market and focus on individual sectors and companies.
According to him, the market as a whole may be overvalued right now. The S&P 500 traditionally trades at 16 times its total earnings. But recently, its price has been closer to 19 times earnings. This isn’t necessarily indicative of a bubble. But it’s a product of temporary factors like low interest rates and cheap energy.
Alex points out that there are still smaller pockets of value within the market. One example is homebuilding. Despite the strong performance of the sector in recent years, homebuilding stocks are still depressed from the 2008 housing market collapse. These stocks are very cheap and will likely grow soon.
There’s generally a reason why value stocks trade at such low prices. As Alex puts it, you can never be sure that a stock is a value investment. Companies with low price-to-earnings ratios tend to be undervalued by the market. And if they outperform the market’s earnings expectations, they can rally substantially.
Alex emphasizes that no astute investor buys stocks based on their history. Value investing means looking at forward-facing metrics.
This is just a sample of the insights from this week’s Oxford Club Radio podcast. To listen to the full broadcast, click here. And while you’re there, be sure to subscribe (it’s free).