A portfolio manager who's been crushing the market since 2006 reveals today's best investing opportunities - and explains why he 'hates' companies who pay employees in stock
- Albert Meyer, chief investment officer and senior portfolio manager at Bastiat Capital, sees big opportunities in an unloved portion of the marketplace.
- He also reveals why he "hates" stock options, and explains his maximum threshold for investing in companies that administer equity-based compensation.
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Being a contrarian is not for the faint of heart.
With earnings estimates retreating, global growth slowing, and valuations on the higher side of the historical spectrum, investor optimism on Wall Street can't exactly be described as robust. And although the Federal Reserve has pledged to preserve the expansion, fresh signs of weakness are forcing more market participants to espouse a pessimistic view.
But not all see the current market environment as a glass-half-empty - and one prominent portfolio manager thinks there are still big opportunities in the marketplace still ripe for the picking.
That would be Albert Meyer, chief investment officer and senior portfolio manager at Bastiat Capital, which oversees $60 million. He's been trouncing the market since 2006, and he plans to keep his impeccable streak going by betting on an unloved area many other investors don't dare touch: Chinese technology stocks.
"With 1.4 billion people, if you own these tech stocks - these real large-cap tech stocks, like Alibaba and Tencent - I believe it's going to pay off," he said. "Unlike most people I talk to, I'm very positive on China."
Meyer's bullish view is at clearly at odds with the market consensus, given the strained US-China trade relationship.
But all of Meyer's eggs aren't in one basket - far from it.
In addition to his Chinese technology call, he's also labeled Microsoft, Google, and Apple as the choice-cuts for his domestic allocations. He thinks Washington's latest attempts to break up the tech giants is "a lot of nonsense," and "political posturing."
But before he buys anything, Meyer always makes sure that his targets lack one make-or-break attribute: a large percentage of equity-based compensation.
Meyer looks at the option overhang - the number of options outstanding divided by the number of shares outstanding - as one of his main determinants of stock selection. And he steers clear of companies with greater than a 5% overhang like the plague.
"I hate stock options, obviously," he said. "If you're an employee, take it and run. That's fine, it's not illegal. But as a shareholder, I don't like it. You're basically diluting shareholders in a massive way."
This idea comes at an apropos time as S&P 500 earnings are forecasted to contract by 2% in the second-quarter.
A lot of uncertainty still remains around the regulatory environment around US tech, and the future trade relationship between the US-China, making the investment outlook all the more nebulous.
But the biggest rewards are often bestowed upon those that stay the course.