NEW YEAR, NEW OPPORTUNITIES
As Green eyes opportunities for Piedmont, he shares investment possibilities with investors. He believes 2010 will be a better year for investors and the economy will grow. “A lot of times when you come out of a recession you expect strong economic growth in the early days but we think the economic momentum will build more slowly,” he says. He does admit that there could be speed bumps but says there’s room for the market to rise another 10% to 15% from its October 2009 levels. With the economy in a recovery, he doesn’t foresee the financial system confronting the same problems as it did last year.
For individual investors, Green practices what he preaches—value and diversity. “There’s risk and there’s opportunity out there. The opportunity is that the stocks look relatively cheap versus corporate profits and there are a lot of high-quality companies with high dividend yields now,” he says. However, there’s a caveat. There’s danger that the U.S. government’s ballooning deficit could further devalue the dollar and perhaps lead to inflationary pressures in the economy over the next few years.
Green likes large global consumer product companies such as Coca-Cola Co. (KO) and Procter & Gamble Co. (PG) that are currently undervalued and have high dividend yields—the dividend per share divided by the price per share. With strong product sales overseas, many benefit if the dollar is weak.
Green maintains commodity stocks are good buys due to global demand and the fact that investors use them as a hedge against a weak currency. Among those he favors: Freeport-McMoRan Copper & Gold Inc. (FCX). “We’ve had positions in copper off and on for the last several years and as the market got really weak in the middle of ’08, we took profits and moved away from some cyclical stocks but then at the end of 2008, we thought the fundamentals were still strong for copper on a global basis because of continued growth rates and demand in the BRIC countries (Brazil, Russia, India, China),” he says. “So we went back into that stock at very low prices and have had a very solid return since then.”
He also says technology stocks are reasonably priced right now, and in the U.S. where the consumer market is weak, the marginal dollar is being spent on technology—by consumers and businesses. His leading tech stock pick is Nvidia (NVDA), a manufacturer of graphic processor chips used by video gamers on computers as well as the Xbox video game console. “We’ve had that in the portfolio throughout the last year or so and the stock has gone up and down but their fundamentals have been strong on a pretty uninterrupted basis and it’s been a very strong performer in the portfolio,” Green says. “That’s based on strong demand by consumers for more video content in their technology via cell phones, video games, or PCs.”
On the flip side, Green isn’t a fan of the retail sector. “The things that require big-ticket consumer spending, I don’t like very much. Retail, home building, those areas, I’m nervous about because people are struggling with large amounts of debt and housing values are depressed and it’s not clear if that’s going to change any time soon.”
Green is also bearish on community banks. “We know about the big bank problems. They’ve been widely publicized. Large amounts of write-offs have been taken and capital has been replenished at the big banks,” he claims. “The small banks weren’t doing securitization and those types of things but what they were doing was lending a lot of money to real estate developers on a local and regional basis. And a lot of that was for commercial development—think strip malls.” He believes those commercial real estate loans are going to haunt smaller banks in the coming year. “A lot of people are concerned about the potential for rising default experience in commercial real estate and that would hit the smaller banks harder.”