“If banks are like utilities, investors haven’t priced them that way,” he added.
Romick said banks are complex and investors discount that, but he said they’re willing to be patient with their bank holdings.
The two well-known stock pickers hold different views on energy stocks. Nygren bought energy-exploration company Apache and Chesapeake, the second-largest natural gas producer. Both have more exposure to crude oil and gas prices than other energy companies, which could benefit them if crude-oil prices return to $80 a barrel. Currently, crude-oil prices are around $59.
Romick said the energy sector doesn’t interest him, adding that “many energy company destroyed capital for many years.”
Regarding greater investor interest in passive index investing versus active management, the two portfolio managers said passive investing has its good points.
“Professional investors underestimate what a great competitor the index is,” Nygren said. “But I don’t think that active investors are destined to underperform.”
Romick said human nature helps skilled stock pickers. “As long as there is fear and greed, there will be the ability to time arbitrage,” he said.
Active value managers can outperform in a downturn, he said, which “allows our clients to make more money” as long as investors have the discipline to stay in the market during a downturn.
It’s the discipline that makes the difference in either style, Nygren said. Investors with long-term horizons and discipline “will always have the advantage over the short-term investor,” he said.