Top fund manager John W. Rogers Jr. says fears have become abundant again in the stock market — and that has him looking for bargains.
“There are any number of well-publicized fears people are using to explain their market worries: the Ebola virus, ISIS, China’s slowdown, an impending European recession, rising interest rates and many more,” Rogers writes in a Forbes column. “Professional investors quickly turn negative and have jumped from bullish to bearish. I don’t invest based on worries. For me, stock prices depend on valuations and fundamentals.”
Rogers says that stocks still look inexpensive, with the forward price/earnings ratio of the S&P 500 index a little over 15 times expected earnings and interest rates low. “Stock market fundamentals remain strong,” he says. “While fears abound over what may happen abroad, people correctly see the United States as an island of relative financial health. U.S. numbers are very solid — from employment to corporate earnings to inflation and consumer confidence. Just as they did in 2011, when it was a good time to buy stocks, commodity prices have fallen considerably. Cheaper oil should be a boon to the U.S. economy.”
Rogers also says the management teams he speaks with are “confident, optimistic and think we’re in the fourth or fifth inning of the expansion.” He thinks it is thus a good time to look for “companies whose stocks have fallen rather sharply even though long-term fundamentals have not deteriorated materially.” He looks at a few such stocks. Among them: industrial sand producer U.S. Silica Holdings.