Friday, September 17, 2004
Portland, OR - Dan Ferris is one shrewd investment analyst. As editor of Extreme Value, Dan makes it his business to find the cheapest stocks in the market.
Dan is an old friend. But he lives in Oregon and I live in Florida, so we don't get together too often anymore. Fortunately, I was booked to speak in Oregon today, so I gave Dan a call. Over his wife's chicken parmigiana, we talked music and guitars (Dan is an exceptional classical guitarist), politics, and investments.
Dan's newsletter is expensive, but worth it. Today, I'll share with you Dan's very latest thoughts on where he's finding great values now, straight from southwestern Oregon...
Where Dan Is Finding Extreme Value Now
Dan and I both think that the housing prices may well go higher... because nearly everyone thinks they can't...
Dan points to the latest issue of Fortune magazine as a gauge of popular sentiment. It says "IS THE HOUSING BOOM OVER? Million-dollar condos. Speculators everywhere. Here's why the bubble is going to pop."
Seeing this, and knowing that housing-related stocks (like homebuilders and title insurance companies) are some of the cheapest stocks in the world (at single-digit P/Es), Dan sees some extreme value here...
Dan says: "I believe your conclusions are right, Steve. The negative sentiment about rising rates and a housing bust are still priced in. If something bad happens after you buy in at these levels, your downside is limited because you bought so low."
Dan has one title insurance company (which makes its money in a bull market in homes), and he says he's considering adding another, as they're so cheap.
Where Dan Is Looking for Value In the Future
Dan's planning a trip to Bermuda. No, he's not going on vacation... he's going to visit insurance companies to recommend to his readers.
Dan sees reinsurers as "piles of money waiting for something bad to happen." And when that pile of assets sells for 25 cents on the dollar as it does now, Dan gets interested. Dan says: "Some of these companies are very good at building up that pile of capital as well. Some can actually make money selling insurance. That means they add to their pile of capital for very low cost."
Some of these are trading at five times earnings. So Dan is going to Bermuda next month, visiting a dozen or more insurers. He already has one Bermuda-based reinsurer in his Extreme Value portfolio. Chances are, after this trip, he'll add another.
Ultimately, Dan only buys when he can "get a big discount to net asset values, earnings power, or both." Dan sees extreme value now in reinsurance companies, homebuilders and title insurance companies, all selling at single-digit P/Es.
With Dan's exceptional track record, it may be worth your while to look into these extreme values. Dan is a smart guy who cares a lot and works hard to deliver great investment research. I think you'll like him and his analysis.
Good investing,
Steve
