Heard of John Neff? Big name value investor - interviewed by FORTUNE magazine recently
money.cnn.com/2009/01/02/magazines/fortu...venson_neff.fortune/
But he has been hunting for other bargains through the final, grim months of 2008, even tapping his bond portfolio in December for extra cash. On the eve of the New Year he shared four stock picks - and his optimism about the market.
\"I think it\'s time to go in, and I have,\" he says. \"And I think retail investors should be availing themselves of the bargains out there.\" For one, Neff believes that both stock and housing prices were scraping the bottom late last year. He also thinks that the economy will start to recover in
2009, helped by the Fed\'s drastic interest rate cuts, low gas prices, and massive discounts by retailers and Detroit. In the meantime he expects his down-and-out stocks to benefit from the rebound. First on his list is Seagate Technology (STX), a top hard-disk-drive manufacturer that supplies Dell, Hewlett-Packard and others. It\'s been a rough ride: Neff thought the stock was cheap at around $20 last January, then watched the shares slide nearly 80% through 2008. He added to his position at $4 in the fall, when the yield had crept up to 12%. In early December the company lowered its earnings estimates for the current quarter. But Neff thinks revenues will recover in the next fiscal year, which for Seagate begins in June. \"It\'s going to have a pretty testy quarter, but I don\'t think the dividend is in question, and that provides some support,\" he says. \"It\'s not going to be a normal year, but I still think next year\'s EPS could be a buck or better.\" He\'s also bullish on another technology stalwart, Hewlett-Packard (HPQ, Fortune 500). \"I wouldn\'t usually own two technology stocks, but at the right price even I can be convinced,\" he says. And he couldn\'t pass up HP, a blue chip that now trades in the mid-30s. \"I think for this challenging year, HP will earn $4 a share,\" he says. \"They\'re leading the pack on PCs, and I think they\'ll get some economies from the EDS acquisition. If I\'m right on $4 for 2009, next year it will be $4.60. That\'s friendly growth.\" He\'s also looking for growth in
energy stocks, since he expects oil prices to rebound from late-2008 lows. \"Obviously the price of oil came down sharply, but even at this level refiners and producers are making pretty good money,\" he says. \"If I\'m right and oil\'s coming back up a bit, they\'ll continue to have good bottom lines.\" Neff did get pummeled on one of his energy picks last year: He started buying ConocoPhillips (COP, Fortune 500) when the stock first dipped last January. \"I thought I was getting quite a bargain at $70 a share,\" he says. But after climbing to $96 in July, the stock started sliding. It ended the year in the low 50s - a steal, in Neff\'s opinion. \"They have great cash flow, and they\'ll raise the dividend in a couple of months,\" says Neff. \"I think they\'ll have $12 in earnings per share for 2008, maybe $11.50. So at a little over $50 a share, I think that\'s a very low multiple.\"
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