Strategies Sessions : Highlights of Conference on Investing
The Times’ Investment Strategies Conference, held last weekend at the Westin Bonaventure Hotel in downtown Los Angeles, drew more than 9,000 attendees over two days to hear and participate in discussions on a range of personal finance and investment topics. Here are a few of the highlights and notable quotes from the conference, which featured some of the country’s top money managers, as well as Securities and Exchange Commission Chairman Arthur Levitt.
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* On the U.S. stock market’s near-record heights: Not surprisingly, a common concern echoed by speakers and attendees alike was the high valuation levels of blue-chip U.S. stocks.
Many of the money managers who spoke on conference panels made the point that investors are right to feel concerned about overpaying.
“What is it really worth?” speaker Robert Bissell, chief investment officer at Wells Fargo Capital Management, asked rhetorically about a stock, any stock. “Someone once said, if we bought stocks like we bought our groceries--instead of our perfume--we’d do well,” he said.
In the supermarket, Bissell said, “you’ll stare at two products for a long time and try to figure out the value proposition. But you’ll buy a stock on a tip.”
A key to successful investing, Bissell said, is buying good, growing businesses at reasonable prices--exactly the strategy that billionaire icon Warren Buffett has employed for decades.
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* On the best ways to find investment bargains today: One panel featured three of the country’s best-known “contrarian” investment managers, who hunt for stocks or other assets that are out of favor, and thus may constitute excellent values that will generate high returns over time.
Robert Rodriguez, manager of the First Pacific Advisors Capital fund in Los Angeles, said one place he looks for contrarian ideas is on the New York Stock Exchange “new lows” list each day, as published in the newspaper. “I’m looking at areas where people are essentially throwing [stocks] away,” he said.
But he cautioned that buying out-of-favor stocks without researching them thoroughly is a dangerous strategy. Indeed, he noted, many stocks that are out of favor deserve to be--and may never recover from their lows.
Even so, Chris Browne of Tweedy Browne & Co. in New York noted that buying stocks with low price-to-earnings ratios and low price-to-book-value ratios has been shown over time to produce above-average rates of return.
But he admitted that it’s a difficult discipline to follow. “You’re turned on by stuff that the broad investing public isn’t. It’s like going into a bar and looking for a date for the night and you want to pick the ugliest one there.”
William Miller of Legg Mason Fund Advisor in Baltimore said the electric utility industry is one beaten-down, unloved field in which he’s searching for contrarian plays today.
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* On the turmoil in the growth-stock sector: Garrett Van Wagoner, head of the San Francisco-based Van Wagoner mutual funds--which have tumbled in recent months after a stellar first half of 1996--fielded some of the toughest questions.
“From someone who has invested in your fund,” asked one woman in the audience, “what the hell is going on?”
The bluntness of that query elicited laughter from the crowd. Van Wagoner conceded that the types of small growth stocks that he targets have slumped since last summer in heavy profit taking. But he said he hasn’t altered his investment approach, because fast-growing companies should produce high stock returns over time. He also said he has most of his personal wealth tied up in his funds. “I share your pain,” he said.
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* On the need for investors to better educate themselves: SEC Chairman Levitt, the conference’s keynote speaker on Sunday, applauded Americans’ increasing desire to learn more about investing, as opposed to blithely trusting someone else--whether a broker, mutual fund manager or other party--to deal with their money.
He said the SEC is “working to forge a partnership with investors, through town meetings like this, and through other initiatives, like our toll-free prerecorded investor information line: (800) SEC-0330; our plain English brochures about choosing brokers or mutual funds; and our Web site at www.sec.gov, which features SEC investor alerts, policy announcements, complaint forms and rule proposals--as well as our huge Edgar database of corporate information.”
But he also conceded that there is a limit to what the SEC can do in its efforts to protect investors from the ever-present risk of fraud.
“We’ll regulate where warranted--but many of the areas I want to address are gray, not black and white, and don’t lend themselves easily to rule making,” Levitt said. “That’s where you can make a difference, by asking informed questions.”
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* On picking an investment advisor: Ronald P. Meier of the College for Financial Planning in Denver urged investors to be inquisitors when selecting an advisor to counsel them on their finances, or to manage some of their assets.
When he was a practicing planner, he said, “very few [potential clients] ever interviewed me. They would come in and within five minutes they would start spilling their guts, laying everything out to me.” That’s a dead-wrong approach, Meier said. “When you’re going out to hire an investment advisor you’re hiring an employee. How many employers do you know who sit around and wait for the employee to start asking detailed, in-depth questions?”
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* On the need for patience in investing: Speaking on a panel that addressed smart investing via 401(k) and 403(b) retirement investment plans, Bill Chapman of Kemper Retirement Plans in Chicago said achieving investment goals requires that an individual build “a globally diversified--what I would call all-weather--portfolio. And then once you’ve done that, you need to sit still. And that may be the hardest [thing] of all.”
Patience, Chapman said, is still a required ingredient for successful investing. He reminded investors that they will at some point be sorely tested by a bear market in stocks, and that they must resolve now not to sell out at exactly the wrong time--after the market has plunged, and it becomes emotionally painful to stay in.
Conference items compiled by staff writer Tom Petruno and by Times contributor Russ Wiles.
