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Published on Sep 26, 2016
Stocks
are expensive around the world and those high valuations makes them
vulnerable to bad news. That's why investors should opt for true value
propositions like Oracle , CIT Group and Hyundai Motor, said Greg Kolb,
CIO for Perkins Investment Management. Oracle may recently have missed
Wall Street's first quarter sales and earnings estimates, nevertheless,
Kolb remains bullish, saying the world's largest database software
company is deeply entrenched within customers with roughly 70% of
profits coming from maintenance cash flows. He also points out that the
company is trading at 14 times next year's earnings estimates and has no
net debt. Two weeks ago, Oracle reported adjusted earnings per share of
55 cents that failed to match the 58 cents that analysts on average
were predicting. Revenue of $8.6 billion was also shy of the $8.7
billion consensus. Kolb is also positive on CIT Group, which has seen
its shares drop 9% thus far in 2016. In Kolb's view, the specialty
lender and U.S. regional bank is trading at a relatively inexpensive ten
times forward earnings and 75% of tangible book value. "The new
management team is pursuing a sale of their aerospace business which we
believe will unlock value from a sum of the parts perspective," said
Kolb." Finally, Kolb is a fan of Korea's Hyundai Motor. Now a top five
global auto company, Hyundai's brands were highly ranked in J.D. Power
quality survey with Kia grabbing the top spot. He also likes the
company's cautious approach to expansion with almost 100% factory
utilization and it's higher than average margins. "Hyundai is a very
inexpensive stock at 5 to 6 times earnings and it is also well under
tangible book value," said Kolb, adding that at Perkins he is careful to
"script a downside scenario" so he is well aware of the risks in a
stock.
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