Investment Opportunities Amid Market Volatility
According to Bill Miller IV, Chairman and Chief Investment Officer of Miller Value Partners, despite the recent turbulence in the U.S. stock market, there are still plenty of investment opportunities available, especially for value investors. Miller’s firm focuses on identifying gaps between their expectations and the market’s implied expectations. He believes that there are many sectors and stocks that are highly investable at the moment. However, he expresses skepticism about tech companies trading at high multiples, particularly when there are concerns about the economy.
The Role of the Federal Reserve
Miller highlights that the Federal Reserve has been removing capital from the system, making it scarcer. As a result, sectors reliant on external financing, like real estate and venture-backed deals, are not performing well. Miller sees this as a return to normal market conditions after a decade of unusual behavior.
Skepticism About High-Valuation Tech Stocks
When discussing high-valuation tech stocks like Apple, Miller argues that their trading multiples are hard to justify based on their growth prospects. He specifically mentions Apple as an example of a company that is shrinking yet trades at 28 times earnings, which he finds unattractive for investment.
Preference for Underappreciated Stocks
Miller reveals his interest in undervalued stocks like AT&T, which he believes is trading at a significant discount compared to the market based on its price-to-earnings ratio. He highlights AT&T’s 16% free cash flow yield and its strategy of using half of it to return to investors while using the other half to pay down debt.
Opinion on Stellantis and the UAW Strike
Miller also expresses interest in Stellantis, a company affected by the ongoing UAW strike. He believes that the strike will eventually end as both workers and companies need each other. Miller sees Stellantis as undervalued and praises its management team for executing well against their goals.
Bond Market Trends
In terms of the bond market, Miller notes that liquidity measures are starting to dry up, indicating that the market may be reaching a breaking point. He hopes that the Federal Reserve will shift its tone in the next meeting by either maintaining or cutting rates, as they are currently higher than inflation readings suggest.
Hot Take: Bonds Becoming Investable Again Amid Increased Volatility
Miller concludes by stating that bonds are becoming investable again after a period where they were not. Despite the increased volatility, he believes that the system is working as it should.
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