This is the Value Investor Podcast with Tracy Rinek, All Things Value All the Time. Welcome back, Value Investors. So I have a special announcement to make this week. It's the 300th episode of the Value Investor Podcast.
Woo hoo! Thank you to everyone for tuning in all these years. When we launched this podcast in July 2016, yes, over six years ago, I didn't know what to expect. Our first show was called Where to Find Value Stocks.
That's a real barn burner title there. I was really trying to lure you all in with that one, but apparently it did work because you've all stuck around for all these years and we're still going strong. So that original episode had about 1400 downloads and that's over the six year time period. And some people even still listening in the last year or so managed to find those really old podcasts.
Sometimes they show up if you Google certain things or certain companies and you find the article on Google and there's the podcast kind of embedded in there in our article. So again, thanks to all of you who have been here since the beginning. I don't know how you've managed to stick around all this time, but you have. And for those of you who found us later, or maybe some of you are new here in 2022, welcome to the show.
It's been a wild ride as value stocks have been in favor for a little while, then they were out of favor for most of the pandemic. And now they're back in favor again. So it's been kind of crazy on the podcast. We found pockets of value even when we were out of favor.
Remember those debates on whether or not you could buy the fang stocks and whether or not as a value investor, you could still buy some growth. Well, just a reminder, you can remember Warren Buffett himself even owns Apple and Amazon, two of the fang stocks. But now it's 2022 and again value is back in favor. And I think it's here to stay at least for a little longer than what we've seen in the past six years.
Heck, even the fang stocks are much cheaper now. Meta platforms, the formerly known as Facebook, is the cheapest at 14 times. But Apple now down to 22 times as it's weakened a bit here. Netflix is trading at 24 times.
Alphabet or the G in the fang is 19 times. It's only Amazon at 586 times. That's really outrageous. And it was cheaper for a while.
It was trading at like 40 times or something 40 or 50 times before it. All of its estimates got cut. It's like shaved way down. So now it's got that big PE again.
So I own Amazon and Alphabet in my own personal portfolio, but I've sold all my meta platform now. I sold it a few months ago here in 2022 because I really just didn't want to own the metaverse. I just don't like that business. And if you don't like the business, then why on the company?
So I sold out of that one. But with stocks having one of their worst September's ever and investors are now throwing in the towel on stock investing, I know a lot of you are comparing it to 2008, right? You think like that's as bad as it's going to get. So I thought we'd take a look again at what was going on in 2008 and what the head of value investing that our leader, let's just call him that.
Warren Buffett was saying in 2008 because advice is relevant today. So I get some criticism for constantly talking about Warren Buffett on this podcast, even though this is the value investor podcast, because he's the greatest value investor ever. Although Ben Graham would probably argue he still takes the title, but Buffett is still with us. We have him around.
He's traded much longer than Ben Graham ever did. So we get to watch his trades and strategies in real time. So he is relevant to value investors, and that's why I'm bringing him up all the time on the podcast. But let's turn back to 2008.
So if you weren't around in 2008 or you were a kid, you were in school and you weren't paying attention to what was going on in the economy and the stock market, or maybe you were older and you still want to block it out. You don't want to remember what was going on back then because it was so terrible. September 2008 was a terrible month for stocks and the economy. Lehman Brothers went under the declared bankruptcy on September 15th.
It was a Monday, that same week, a bank of America acquired Merrill Lynch. Other financial institutions were asking for bailouts and or about to possibly go under. By October, things got worse. From October 6th through October 10th, 2008, the Dow closed lower every session and fell 18% during that week.
It was at the time one of the worst weeks ever on the stock market. I think it still is, even worse than the pandemic weeks that saw that swift selloff. Although I'd have to go back and check on that because the pandemic was pretty bad too. But that week in October was terrible.
That was a form of capitulation was happening. Nobody wanted out, nobody wanted anything to do with stocks. In 2022, I don't believe we're seeing as much of this capitulation moment, not quite yet. Even though everybody keeps thinking we are, it's not as bad as 2008.
However, with all that pain going on in 2008, Warren Buffett published an app ed in the New York Times. I've talked about this on prior episodes, but you might not have been around when I did those episodes. As it was a while ago, the last time I talked about this app ed. And now again, I feel like this is more relevant than ever.
We're in October again, October 2022, this time, not October 2008. Things are still a little shaky coming off of one of the worst September, as I said. The last worst September was September 2008. So that's what has everybody all nervous.
So on October 16th, 2008, he published this app ed and it was titled by American Period. I am period. So that just got right to the point right there. He was telling everybody what he was doing.
He talked about how scary things were and that unemployment would rise further. And business activity would falter. Yet he was buying American stocks in his own personal account, not the Berkshire Hathaway, his own account, which previously had owned only US government bonds. He said he was going to get to 100% equities in that account because he said, quote, be fearful when others are greedy and be greedy when others are fearful.
Unquote. He talks about how businesses will suffer earning hiccups. That's his word hiccups as they always have. But he believed most major companies would be setting new profit records five years, 10 years or 20 years from then.
Now, remember the S&P 500 earnings were at new record highs last year. May hit it again this year or may not. I'm not sure people are cutting everywhere now, but it's been a couple of good years in a row for the S&P 500. So he got it right.
We're not even at the 20 year mark yet from when he wrote that app ed and there were new records. He urges people not to market time in the app ed. He said stocks usually turn around well before the recession ends because, as we all know, stocks are forward looking. So they already price in all the bad news and then they start to rebound.
He said, as well, quote, in the early 80s, the time to buy stocks was when inflation raged and the economy was in the tank, unquote. You know, he, oh, he then went out to say it lets you buy a slice of America's future at a markdown price. So that's some good advice because here we are again with an inflation problem and, you know, a lot of stocks in the tank, right, as he would say. He finished the app ed by saying that equities would almost certainly outperform cash over the next decade, probably by a substantial degree.
And then he said, quote, those investors who cling now to cash are betting they can efficiently time their move away from it later, unquote. And I've talked in the past about how hard it is to market time. We all think we can do it. We all think, oh, yeah, we'll rotate back in there, you know, near the bottoms or, you know, you just have all these reasonings about why you can market time.
But most of us really can't do it. I think I've talked about during the financial crisis. I stayed investing in my 401k throughout, throughout September, October 2008, November, December, January, February, but then I threw in the towel because stocks did continue to decline well after Buffett put out this op ed. It got worse.
He says in the op ed, he's not saying it wouldn't get worse in the short term or even in a year from when he wrote this op ed that it could still be bad. But he was talking about the much longer time period of five, 10 or 20 years out. So by that March of 2009, I couldn't take the losses anymore. You would put in money into your 401k and it would almost all be wiped out within like a week or two of putting it in there.
And you're like, why am I doing this? So I started to put it into cash. I still put the same amount into my 401k, but I did not go into the equity funds I was in. I went into cash.
And what was March 2009? That was the lows and stocks rebounded off of that and started moving higher and never looked back. So did I time it right? No, I timed it completely wrong.
Now, unlike some people, I did not stay in the cash for very long and I didn't sell anything else. So I still had equity exposure, but it still took me several months before I felt good enough to start going back into the stocks with my new contributions. So that's why dollar cost averaging is your friend, but you have to stay the course in equities. And if your stomach can't take it, do opposite of what I did, just stop looking at it because then you won't know what it's doing and you'll stay the course.
So you'll have more opportunities because you won't be as emotional about it. So what should you be buying right now? If you want a dollar cost average and stay the course right now, stocks are on sale. And I thought I didn't really want to do a screen.
I just wanted to look at some stocks that have been around a long time because Buffett's op-ed basically said there's great American companies. They've been through depressions, recessions, assassinations, wars, all of these things. And so these companies have the management. They know what it takes to survive and many of them are on sale now.
So I just picked some big cap companies that I know have been around a long time out of the top of my head to take a look at. Most of them are cheap and they all pay dividends and that's what I want right now. So let's dive right in and see what's cheap, who are these big guys and what kind of dividends are the paying. So the first one is an energy ExxonMobil.
They've been around for forever. I think for XOM Buffett is currently buying Chevron. It's competitor CVX. Is that ticker?
It doesn't really matter to me. They both been around a long time, but I'm going to focus on Exxon right now. PE is 7.4. PEG is just 0.3.
The shares are up. You're to date. Up 62%. So some people might be intimidated.
It's had the big run. Why get in now? Because it's still cheap. And energy prices remain elevated.
The cash flows are good with ExxonMobil and the earnings look good, unlike some other companies. Dividend is yielding 3.7%. So we get the good dividend yield as well with Exxon. Same good yield with Chevron.
So that's ExxonMobil, XOM. Second one I've talked about many times on the Value Investor. So we don't need to reinvent the wheel. Pfizer ticker PFE.
PE is just 6.8. PEG 0.5. It's down 25% year to date. I think I just talked about it a week or two ago.
It was down then. I think it's down more now. So it's even cheaper. Dividend yielding 3.6%.
So it's cheap. It's got the dividend. I'm still sinking. So you might be able to get it even cheaper eventually.
Third stock, Union Pacific, the Railroads, UNP. I love Union Pacific. I don't own it currently. It has fallen from its size.
It's year to date. It's down 20% now. It's a little pricier compared to some of the others, but it is off of its PE high as well. PE is now 17.7.
PEG is at 1.8 and the dividend is yielding 2.5%. Union Pacific has been around since 1860s. So the Railroads haven't really gone anywhere and it's become even more important to the US economy in the last, say, 20 years. We haven't found a replacement yet for those rails.
So I do like the railroad side of things right here, but these could go cheaper too. The fourth stock might be a surprise to some of you. ticker CSCO. Year to date down 34% now, but it is cheap.
PE of 11.8. PEG of just 1.8 and the dividend yield on Cisco now 3.6%. I know it's a favorite of a lot of dividend investors for that reason, but Cisco, once now that it's come way down is looking attractive here. So you get a little tech exposure as well.
They've been around when IPO in like 1990, so they've been through quite a few things as well as the company. And then I did go to the financials for the fifth stock. You shouldn't be surprised, which one I picked, PNC Financial. Again, you don't have to be a genius right now.
PNC Financial, one of the big regional banks, regional banks should do well here as the Fed is raising rates. PNC is the ticker. Buffett did use on this and Berkshire Hathaway portfolio, but he sold out of most of his banks, including PNC. But his loss doesn't have to be ours.
PE 11.1, PEG is 2.4, but you do have to look at the price to book with the banks and it's at 1.38. So there's always that mantra, buy at one, sell at two. So it's closer to one. I still like it here.
It's cheap. Year to date, these shares are down 20.5% now. So they have gone on sale. And again, you're getting the dividend yield of 3.7%.
So almost four there with PNC now. That's very juicy. I'm liking the dividends here. Don't you?
Like, I'm really enjoying getting some of these bigger yields. If you're only getting one to 2%, you're kind of like, meh, on your holding sometimes you get like a check for 40 bucks or something. But once you start to get over 3%, starts to look a little bit better on what they're paying you out to get. And you do start to notice it compounding a little bit faster too.
So that is kind of a trend with these stocks I picked. They all pay dividends. And everyone except UNP is over 3%. And a value type of market, dividends do matter, gives you that extra couple percent on top of whatever appreciation you hope to get.
And that few extra percent can make a big difference in your returns. So we've been at this for six years. I've never been more excited as a value investor as I am now. Now is the time for value.
But remember, you own the business. So make sure you're checking those earnings. You want to get them cheap in these type of market conditions with the Fed tightening. A lot of companies are going to be cutting their earnings estimates.
That's pretty normal. As Buffett said in his op-ed in 2008, there's going to be earnings hiccups. There's going to be a decline in a recession. That's what it's all about.
Those earnings are going to come down. But you buying the company, you're buying a company that hopefully in five or ten years will have returned to growth and returned to better things for you. But you're buying it cheap even if those earnings are cut. So keep those things in mind.
Stay the course. Keep your wish list. I've talked about that in past episodes. And all these types of bear markets do come to an end.
Buffett's op-ed was in October, again October 16th, 2008. The markets bottomed in March 2009. So he was five months too early. But you can't time the bottom on these things.
And so much would ask him what happened to those investments he made in 2008 in his own personal account. He's never told us. Does he still own them? What did he buy back then?
He's never said that either that I know. But I would like to know. And someone, hey, if you're attending his annual meeting next year, someone ask him what he did with those stocks if he still owns them and how well he's doing. Because I'm sure he would like to brag about it if he does still own those positions.
So let me recap the stocks I talked about. There was Exxon ticker XOM. You could look at Chevron too, which Berkshire Hathaway is CVX is that ticker Pfizer, PFE, Union Pacific, UNP, Cisco, CSCO, PNC Financial, PNC, and that list may seem kind of dull or boring or I don't know what else you would describe it. But these are just big caps, been around a while and cheap and possibly getting cheaper.
And they all paid dividends. So nothing to dislike about that list here in 2022 as we're in this stock market correction and value is back in. So get them as cheap as you can. And as always, I'm bringing you value stocks every week.
After we've done 300 episodes, we're continuing on next week. So be sure to subscribe so you don't miss a single episode. You can get us on Apple Podcast. You can get us on Spotify.
You can get us on Amazon Music and we're on SoundCloud with the Zex Market Edge where I'm up to episode 331 now. More episodes on the Zex Market Edge. They all have stocks and I'm so be sure to catch both shows and I'll see you again next week with some more value stocks. This material is being provided for informational purposes only.
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