Contrarian stock market investing tips from top-ranked Jason Subotky

Jason Subotky is one of the managers of the No. 1 and No. 2 large-cap funds of the past 20 years, and he says his funds have thrived because of unusual value-focused bets.Subotky has spent the past decade comanaging the AMG Yacktman Focused Fund and AMG Yacktman Fund, both of which have climbed more than 11% a year for two decades.He told Business Insider about some of his top contrarian bets today, including an enormous bet on Samsung.Click here for more BI Prime stories.Looking for ways to beat the stock market for 20 years can lead to some surprising places.Jason Subotky of Yacktman Asset Management — who comanages the two most successful large-cap funds of the past two decades — said he and his partners were succeeding by being willing to ignore what everyone else thinks.”Most of what we do is fairly contrarian because that’s where you get the best prices,” he said in an exclusive interview with Business Insider. “We’ve made a lot of money and very unpopular positions over time because the valuation can become incredibly attractive. “Being contrary for its own sake doesn’t work very well; there has to be a method. Subotky’s funds are relentless in looking for undervalued companies and flexible in thinking about where their value comes from, he said. How well has that method worked? The AMG Yacktman Focused Fund has returned 11.7% a year for 20 years, according to Kiplinger. And the AMG Yacktman Fund Class I, which has a slightly more diversified portfolio, has returned 11.6% per year. Both funds are crushing the S&P 500 and Russell 1000 value indexes.Subotky has coled both funds for the past 10 years, and he explained the thinking behind some of his largest and most surprising calls.Samsung over AppleSubotky thinks investors have wildly mispriced two international conglomerates. So he’s made a giant bet on Samsung in the past two years, and the electronics company makes up 14.3% of the Focused portfolio and 8.9% of the Yacktman portfolio. Subotky said the South Korean company has a lot going for it that investors aren’t appreciating, including its financial strength. He said about 40% of its balance sheet is in net-cash-plus investments — which makes for natural value appreciation.”It’s just unusually inexpensive for the unbelievable competitive businesses that they own,” he said. “It’s an incredibly cheap stock, and it probably trades at a 75% discount to Apple, who’s both a competitor in the phone business and a customer in that it consumes display and semiconductor chips.”BolloreThe funds’ second-largest holding is the French conglomerate Bollore, and Subotky said its size was causing the market to overlook some of its businesses entirely.Bollore’s best-known business is a 26% investment in the music and media company Vivendi, the owner of Universal Music Group.”The vast majority of the value comes from Universal Music Group, which is the leading owner of content for music and publishing,” he said. But he said its global logistics business should be worth about as much.”You get that [logistics] business for free, and that business is worth pretty much the same or a similar amount to the Vivendi stake.”On top of that, the fact that Bollore is headquartered in France is a huge benefit to investors because of that country’s low corporate capital-gains tax.Macy’sMacy’s is among the worst-performing and most shorted US stocks this year as it suffers through the ongoing retail apocalypse. Subotky describes the department-store chain as “abandoned” and “hated,” suggesting he’s not expecting a big return anytime soon.Even so, he thinks the stock stands out compared with other department stores and has room to rally when investors’ fears fade. That’s not because he expects a big recovery in its sales, but because he thinks Macy’s is dramatically undervalued. “We think it’s incredibly cheap to the cash flow and also has significant value in its real-estate portfolio,” he said. “We think you have real-estate value that’s more than the current enterprise value.”

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *