A Contrarian’s View of Value: Pharmaceuticals

A Contrarian’s View of Value: Pharmaceuticals

This is the third in a three-part series on sector opportunities as seen by a contrarian value investor — Senior Portfolio Manager Kevin Holt. The previous posts discussed financials and energy.

The pharmaceuticals industry is in the midst of a renaissance.  Patent expiration concerns, pipeline disappointments and setbacks, and a highly uncertain regulatory backdrop have forced managements to rethink the way they have historically conducted business. In this environment, certain companies stand out to us as deep value opportunities — businesses whose stock prices don’t reflect our view of their long-term potential.

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A Contrarian’s View of Value: Energy

A Contrarian’s View of Value: Energy

This is the second in a three-part series on sector opportunities as seen by a contrarian value investor — Senior Portfolio Manager Kevin Holt. The previous post discussed financials.

Demand for oil is growing at 1% to 1.5% per year. Production from many current wells is declining in the neighborhood of 5% annually. And new production is increasingly difficult and costly to locate. All this means that the oil industry must run quickly just to stay in the same place.

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A Contrarian’s View of Value: Financials

A Contrarian’s View of Value: Financials

This is the first in a three-part series on sector opportunities as seen by a contrarian value investor — Senior Portfolio Manager Kevin Holt.

In the wake of the Great Recession, and significant regulatory changes, investors are concerned that large banks may not be able to generate the type of profits that they have in the past. We don’t disagree with that assessment. However, we do disagree with the current equity valuations of the large banks — we believe the market has priced in a too-pessimistic view of profitability.

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The Big Bank Theory

The Big Bank Theory

Mr. Holt’s Investment Insight, Strong Comeback for Financials, offers a more in-depth discussion of the post-recession resurgence of the financial sector.

The market has moved higher over the last several years, and valuations among sectors and industries have compressed. Against this backdrop, we’re finding the greatest concentration of deep value opportunities in the financial sector — specifically, in the larger money center banks. Recent headlines, such as JPMorgan Chase’s $13 billion legal settlement with the government, support our view that this sector is well-positioned for future upside.

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