Value managers can love growth, which may come as a surprise to some investors.
But it shouldn’t be a surprise, says Bill Nygren, manager of the Oakmark Select, Oakmark Fund and Oakmark Global Select.
“As a value manager, I don’t have to say, ‘I don’t like growth,’” he says.
Apple trades at eight times earnings after stripping out cash and it’s cheaper than Cummins Engine, which is considered a value stock, Nygren notes. “No one questions why a value manager” holds Cummins, he adds.
Value managers can buy into growth as long as they avoid paying for it at a premium, he says.
Valuations are critical even when looking at growth companies, says Steve Wymer, manager for Fidelity Asset Management’s Fidelity Growth Company. If buying growth stocks for the long-term, investors need to assess whether the company’s growth is sustainable.
Nygren and Wymer, veteran active managers on opposite ends of the investing universe, reflected similar thinking when they spoke on a panel about active investing at the Morningstar Investment Conference yesterday in Chicago.
There’s not much of a distinction between growth and value, Nygren says. They are on the same “continuum,” far removed from strategies such as momentum investing, he explains.
An example of their common view is seen in their outlook on Apple. Both say the company needs to be nimble as it goes forward since the smart-phone business has matured.
Apple gets 50 percent of its sales and 70 percent of its profits from iPhones, Wymer says. “There are plenty of examples where profits evaporate overnight,” Wymer says, citing Nokia, Research in Motion and Motorola.