At least on macro scale, Investment Guru John Hussman is convinced the stock markets are not as undervalued as some may claim. First of all, he does not think a simple P/E ratio based on one-year’s earnings is not a good gauge to evaluate stocks. To be predictive, one needs to use the stream of cash flow that will be delivered to the investors. Using his models, he estimates “the S&P 500 is priced to achieve sub-5% returns, albeit with significant risk, for every horizon out to a decade.”
Also he is convinced the current corporate profit level is not sustainable. Quite to the contrary, he illustrated using historical data that when corporate profitability is this high, the future is usually pretty bleak for the earnings growth. As he stated in this week’s market commentary:
But that is on the macro level. Stock investors do not only live in the marco world, even bearish Hussman has to make individual investment decisions. Assuming he applies the same gauges on the individual stocks as he uses on macro level, the stocks he buys worth particular attention from the investors, especially the ones he keeps on buying in recent history, at least two weeks in a row:
No. 1: PepsiCo Inc. (PEP, Financial), Weightings: 2.08% - 2,250,000 Shares
John Hussman owns 2,250,000 shares of PEP, valued as $149 million as of Sep. 30, 2010, which accounts for 2.08% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 139.4%, again in the Sep. 30, 2010 quarter by 28.57%.
PepsiCo, Inc. consists of: Frito-Lay Company, Pepsi-Cola Company, and Tropicana Products. Pepsico Inc. has a market cap of $102.84 billion; its shares were traded at around $64.64 with a P/E ratio of 16.24 and P/S ratio of 2.38. The dividend yield of Pepsico Inc. stocks is 2.97%. Pepsico Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Pepsico Inc. the business predictability rank of 4-star.
No. 2: The Clorox Company (CLX, Financial), Weightings: 1.62% - 1,750,000 Shares
John Hussman owns 1,750,000 shares of CLX, valued as $117 million as of Sep. 30, 2010, which accounts for 1.62% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 100%, again in the Sep. 30, 2010 quarter by 75%.
The Clorox Company has a market cap of $8.82 billion; its shares were traded at around $63.52 with a P/E ratio of 15.02 and P/S ratio of 1.59. The dividend yield of The Clorox Company stocks is 3.46%. The Clorox Company had an annual average earning growth of 11.6% over the past 10 years. GuruFocus rated The Clorox Company the business predictability rank of 5-star.
No. 3: The TJX Companies Inc. (TJX, Financial), Weightings: 1.4% - 2,250,000 Shares
John Hussman owns 2,250,000 shares of TJX, valued as $100 million as of Sep. 30, 2010, which accounts for 1.4% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 33.33%, again in the Sep. 30, 2010 quarter by 12.5%.
TJX Companies, Inc. is an off-price retailer of apparel and home fashions in the U. The Tjx Companies Inc. has a market cap of $18.35 billion; its shares were traded at around $45.79 with a P/E ratio of 13.96 and P/S ratio of 0.9. The dividend yield of The Tjx Companies Inc. stocks is 1.31%. The Tjx Companies Inc. had an annual average earning growth of 11.5% over the past 10 years. GuruFocus rated The Tjx Companies Inc. the business predictability rank of 4.5-star.
No. 4: Laboratory Corp. of America Holdings (LH, Financial), Weightings: 1.36% - 1,250,000 Shares
John Hussman owns 1,250,000 shares of LH, valued as $98 million as of Sep. 30, 2010, which accounts for 1.36% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 253.98%, again in the Sep. 30, 2010 quarter by 56.25%.
Laboratory Corporation of America Holdings, is one of the largest independent clinical laboratory company's in the United States. Laboratory Corp. Of America Holdings has a market cap of $8.45 billion; its shares were traded at around $82.17 with a P/E ratio of 15.24 and P/S ratio of 1.8. Laboratory Corp. Of America Holdings had an annual average earnings growth of 17.6% over the past 10 years.
No. 5: Dell Inc. (DELL, Financial), Weightings: 1.26% - 7,000,000 Shares
John Hussman owns 7,000,000 shares of DELL, valued as $91 million as of Sep. 30, 2010, which accounts for 1.26% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 100%, again in the Sep. 30, 2010 quarter by 75%.
Dell Inc. is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. Dell Inc. has a market cap of $26.1 billion; its shares were traded at around $13.42 with a P/E ratio of 11.88 and P/S ratio of 0.49. Dell Inc. had an annual average earning growth of 4.1% over the past 10 years.
To check the complete list of of John Hussman, please go here
Also he is convinced the current corporate profit level is not sustainable. Quite to the contrary, he illustrated using historical data that when corporate profitability is this high, the future is usually pretty bleak for the earnings growth. As he stated in this week’s market commentary:
The chart below underscores the relationship between high current profit margins and poor subsequent earnings growth. The blue line shows U.S. corporate profits as a percentage of GDP (left scale), which is currently just over 8% and at the highest level since 2007. The red line depicts subsequent 5-year growth in profits, but on an invertedright scale (higher values are more negative). In effect, it should not be a surprise if present levels of corporate profits are followed by negativeprofit growth over the coming 5 years. Indeed, the 2009 burst of stimulus spending is most probably the only factor that has prevented profit growth from being negative over the most recent 5-year period.
But that is on the macro level. Stock investors do not only live in the marco world, even bearish Hussman has to make individual investment decisions. Assuming he applies the same gauges on the individual stocks as he uses on macro level, the stocks he buys worth particular attention from the investors, especially the ones he keeps on buying in recent history, at least two weeks in a row:
No. 1: PepsiCo Inc. (PEP, Financial), Weightings: 2.08% - 2,250,000 Shares
John Hussman owns 2,250,000 shares of PEP, valued as $149 million as of Sep. 30, 2010, which accounts for 2.08% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 139.4%, again in the Sep. 30, 2010 quarter by 28.57%.
PepsiCo, Inc. consists of: Frito-Lay Company, Pepsi-Cola Company, and Tropicana Products. Pepsico Inc. has a market cap of $102.84 billion; its shares were traded at around $64.64 with a P/E ratio of 16.24 and P/S ratio of 2.38. The dividend yield of Pepsico Inc. stocks is 2.97%. Pepsico Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Pepsico Inc. the business predictability rank of 4-star.
No. 2: The Clorox Company (CLX, Financial), Weightings: 1.62% - 1,750,000 Shares
John Hussman owns 1,750,000 shares of CLX, valued as $117 million as of Sep. 30, 2010, which accounts for 1.62% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 100%, again in the Sep. 30, 2010 quarter by 75%.
The Clorox Company has a market cap of $8.82 billion; its shares were traded at around $63.52 with a P/E ratio of 15.02 and P/S ratio of 1.59. The dividend yield of The Clorox Company stocks is 3.46%. The Clorox Company had an annual average earning growth of 11.6% over the past 10 years. GuruFocus rated The Clorox Company the business predictability rank of 5-star.
No. 3: The TJX Companies Inc. (TJX, Financial), Weightings: 1.4% - 2,250,000 Shares
John Hussman owns 2,250,000 shares of TJX, valued as $100 million as of Sep. 30, 2010, which accounts for 1.4% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 33.33%, again in the Sep. 30, 2010 quarter by 12.5%.
TJX Companies, Inc. is an off-price retailer of apparel and home fashions in the U. The Tjx Companies Inc. has a market cap of $18.35 billion; its shares were traded at around $45.79 with a P/E ratio of 13.96 and P/S ratio of 0.9. The dividend yield of The Tjx Companies Inc. stocks is 1.31%. The Tjx Companies Inc. had an annual average earning growth of 11.5% over the past 10 years. GuruFocus rated The Tjx Companies Inc. the business predictability rank of 4.5-star.
No. 4: Laboratory Corp. of America Holdings (LH, Financial), Weightings: 1.36% - 1,250,000 Shares
John Hussman owns 1,250,000 shares of LH, valued as $98 million as of Sep. 30, 2010, which accounts for 1.36% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 253.98%, again in the Sep. 30, 2010 quarter by 56.25%.
Laboratory Corporation of America Holdings, is one of the largest independent clinical laboratory company's in the United States. Laboratory Corp. Of America Holdings has a market cap of $8.45 billion; its shares were traded at around $82.17 with a P/E ratio of 15.24 and P/S ratio of 1.8. Laboratory Corp. Of America Holdings had an annual average earnings growth of 17.6% over the past 10 years.
No. 5: Dell Inc. (DELL, Financial), Weightings: 1.26% - 7,000,000 Shares
John Hussman owns 7,000,000 shares of DELL, valued as $91 million as of Sep. 30, 2010, which accounts for 1.26% of his equity portfolio. John Hussman added his positions in the Jun. 30, 2010 quarter by 100%, again in the Sep. 30, 2010 quarter by 75%.
Dell Inc. is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. Dell Inc. has a market cap of $26.1 billion; its shares were traded at around $13.42 with a P/E ratio of 11.88 and P/S ratio of 0.49. Dell Inc. had an annual average earning growth of 4.1% over the past 10 years.
To check the complete list of of John Hussman, please go here
