WEBVTT - AAM's Colyer on Equities: Avoid Defensive and Expensive (Audio) 0:00:02.200 --> 0:00:05.560 Global business news twenty four hours a day. If Bloomberg 0:00:05.640 --> 0:00:08.720 dot com the radio plus mobile lab and on your radio. 0:00:09.000 --> 0:00:13.040 This is a Bloomberg Business flag from Bloomberg World Headquarters. 0:00:13.160 --> 0:00:16.919 I'm Charlie. Tell us the Dow, the SMP, Nezdak Hall advancing. 0:00:16.920 --> 0:00:19.240 We've got thirteen minutes to go ahead of the close. 0:00:19.720 --> 0:00:23.480 The SMP five hundred index very close to a record down. 0:00:23.520 --> 0:00:27.480 Industrials up three points now at eighteen thousand, five hundred 0:00:27.480 --> 0:00:30.320 thirty two, a gain of less than point one percent. 0:00:30.560 --> 0:00:34.600 SMP five hundred Index also advancing by less than one 0:00:34.640 --> 0:00:36.800 tenth of one percent. Right now up a point at 0:00:37.520 --> 0:00:40.960 eight one. The nez Dak Composite indext up twelve to 0:00:41.040 --> 0:00:43.360 fifty two twenty five, a gain of two tents of 0:00:43.440 --> 0:00:46.760 one percent. Gold up five seventy the ounce to thirteen 0:00:46.840 --> 0:00:49.120 forty two, a gain of four tenths of one percent. 0:00:49.440 --> 0:00:52.400 The tenure up sixteen thirty seconds, zeal there one point 0:00:52.440 --> 0:00:56.440 five three percent, and crude oil West Texas Intermediate Crew 0:00:56.600 --> 0:00:59.240 down eight tens of one percent, falling thirty four cents 0:00:59.240 --> 0:01:02.480 of barrel forty two six eight right now on West 0:01:02.520 --> 0:01:06.880 Texas Enemydia Crude. I'm Charlie Pellett, and that's a Bloomberg 0:01:06.920 --> 0:01:13.120 business flash. You're listening to taking stock with Bimbox and 0:01:13.280 --> 0:01:19.959 Kathleen Hayes on Bloomberg Radio. Value investing versus growth investing. 0:01:20.120 --> 0:01:25.120 Some of those growth stocks we know, such as Alphabet, Facebook, Amazon, 0:01:25.400 --> 0:01:29.200 and Netflix. Well, that was maybe last year's story. Here 0:01:29.240 --> 0:01:31.480 to tell us about what might be this year's story 0:01:31.560 --> 0:01:35.119 and value is Scott Collyer. He is the chief executive 0:01:35.160 --> 0:01:39.160 officer and the chief investment officer of Advisor's asset management, 0:01:39.480 --> 0:01:42.760 helping to manage more than sixteen and a half billion 0:01:42.800 --> 0:01:46.440 dollars of customer assets. Scott, thank you very much for 0:01:46.520 --> 0:01:50.000 being with us. How do you define a value investor? 0:01:51.400 --> 0:01:56.920 I think a value investor looks uh for um intrinsic 0:01:57.000 --> 0:02:02.320 value or more historical value and rise to to um 0:02:02.440 --> 0:02:08.320 the spot um asset classes that might be out of favor, 0:02:08.360 --> 0:02:11.280 but but there's some sort of a catalyst that might 0:02:11.320 --> 0:02:15.239 bring them back in favor. There. You know, the value 0:02:15.280 --> 0:02:18.799 investor that got stuck buying buggy whips waited a long 0:02:18.840 --> 0:02:21.640 time because there was really never a catalyst to to 0:02:21.720 --> 0:02:24.160 bring those back. So I think what we look for 0:02:24.320 --> 0:02:27.200 is is we look for not only value, as in 0:02:27.880 --> 0:02:30.400 the asset is cheap. But is there a catalyst that 0:02:30.440 --> 0:02:32.920 would bring it back into vogue. I thought you were 0:02:32.919 --> 0:02:36.239 going to tell me it's being unpopular because the value 0:02:36.280 --> 0:02:39.760 investor has been unpopular for quite a while. They have, 0:02:40.040 --> 0:02:43.080 but sometimes you don't want to admit that about yourself. 0:02:43.160 --> 0:02:45.600 So it may be unpopular. But but I tried to 0:02:45.639 --> 0:02:48.520 define it in a nicer way. Well done. Tell us 0:02:48.560 --> 0:02:52.000 about defining some of the areas that value investors ought 0:02:52.040 --> 0:02:56.040 to look for for returns? Well, I think some of 0:02:56.040 --> 0:02:59.560 the places where where we would we would spot value 0:02:59.600 --> 0:03:02.760 today a would you know, in the US markets, we 0:03:02.840 --> 0:03:07.320 continue to look at, you know, energy and materials, even 0:03:07.320 --> 0:03:10.240 though they've had a good first half of the year. 0:03:11.320 --> 0:03:15.200 We would submit that after a very long bowl excuse me, 0:03:15.320 --> 0:03:19.600 bear market, especially for materials, being about four years in length. 0:03:19.960 --> 0:03:23.200 Generally those trends take a long time to play out 0:03:23.200 --> 0:03:26.320 to the upside, just like they do the downside. We 0:03:26.400 --> 0:03:32.720 think that there's a a global growth uh cycle that's 0:03:32.760 --> 0:03:37.480 just beginning, and quite frankly, there's been no new deposits 0:03:37.480 --> 0:03:40.160 of this stuff found over the last few years because, 0:03:40.240 --> 0:03:44.240 quite frankly, it hasn't been profitable to drill or dig 0:03:44.320 --> 0:03:47.160 for them. So I you know, we we continue to 0:03:47.240 --> 0:03:50.800 like those we've seen the catalysts begin to bring prices 0:03:50.840 --> 0:03:52.760 up that we think there's a long way to go there. 0:03:53.280 --> 0:03:56.320 On a more global basis, I think places that right 0:03:56.360 --> 0:04:01.640 now are are hated the most, maybe like Europe, uh 0:04:01.840 --> 0:04:06.560 England even in the Brexit vote, as well as Asia, 0:04:06.640 --> 0:04:10.320 we think those are areas that provide a lot better 0:04:10.440 --> 0:04:13.440 value than we find in many of the the you know, 0:04:13.480 --> 0:04:16.400 the US based companies, And we would suggest that there's 0:04:16.440 --> 0:04:19.599 catalysts there in the fact that there's huge amounts of 0:04:19.640 --> 0:04:24.760 liquidity available at historically low prices, and generally governments that 0:04:24.800 --> 0:04:28.360 are trying to be quite supportive of economic growth. I 0:04:28.400 --> 0:04:30.600 wonder if you could just expand a little bit on 0:04:30.640 --> 0:04:35.800 the concept of intrinsic value, because if you buy a stock, 0:04:36.000 --> 0:04:39.160 it is possible you always run the risk at the 0:04:39.160 --> 0:04:41.680 coming cope go out of business and you'd be left 0:04:41.720 --> 0:04:45.440 with nothing. But in the case of an asset such 0:04:45.480 --> 0:04:49.479 as a barrel of oil or a bar of gold, 0:04:49.920 --> 0:04:53.719 you still have that physical asset. Does that change the 0:04:53.720 --> 0:04:56.719 way you look at the investment, Well, I think it 0:04:56.839 --> 0:05:00.160 changes the way you look at it at the very 0:05:00.160 --> 0:05:04.080 fundamental base and that I'm not sure what you do 0:05:04.320 --> 0:05:06.719 with a barrel of oil. I'm not really sure what 0:05:06.839 --> 0:05:09.680 you do with a bar of gold, But folks that 0:05:09.880 --> 0:05:13.960 mind them and folks that drill for them basically bring 0:05:14.000 --> 0:05:16.880 them up to the surface and sell them, hopefully at 0:05:16.880 --> 0:05:19.400 a profit. So at the end of the day, you 0:05:19.760 --> 0:05:23.039 can buy gold as a currency replacement, or you can 0:05:23.040 --> 0:05:26.719 buy a gold miner that potentially has an enterprise that 0:05:26.760 --> 0:05:31.080 would throw off profits and potentially have some growth. I'm 0:05:31.080 --> 0:05:35.080 not a big fan of trying to to play the 0:05:35.120 --> 0:05:39.960 commodity itself because quite frankly, um, there's there's a number 0:05:40.000 --> 0:05:43.120 of things that can happen to the commodity that you 0:05:43.120 --> 0:05:46.520 would have no control over whatsoever, even though you can 0:05:46.560 --> 0:05:49.680 buy gold coins and stick them in your mattress and hopefully, 0:05:49.760 --> 0:05:52.320 unless you're robbed, they'll still be there tomorrow. I think 0:05:52.320 --> 0:05:54.720 the way that we look at it is after you've 0:05:54.760 --> 0:05:58.320 gone through a prolonged time period when depleting assets have 0:05:58.400 --> 0:06:03.000 not been replaced, such as oil, gold, iron ore, and 0:06:03.120 --> 0:06:05.919 you have demand that is rising for those which we 0:06:06.000 --> 0:06:10.200 currently do have, then the scarcity value, the price of 0:06:10.279 --> 0:06:12.559 that has to rise to the point of where people 0:06:12.560 --> 0:06:16.360 will go out and try to find more. So once again, 0:06:16.480 --> 0:06:19.559 it's it's really a traditional cycle. Pan It's not something 0:06:19.600 --> 0:06:23.440 that's you know, that's popular right now. These are long 0:06:23.560 --> 0:06:26.560 dated commodity cycles and they have happened, you know, over 0:06:26.640 --> 0:06:29.520 the over the years and decades before. It's not really 0:06:29.560 --> 0:06:32.680 anything new. Well, you mentioned that word popular again, and 0:06:32.720 --> 0:06:34.919 I just want to pick up on that, because sometimes 0:06:34.960 --> 0:06:39.159 it's difficult to invest in things that are unpopular. But 0:06:39.240 --> 0:06:44.000 in your experience, is that where real money is made? Well, I, 0:06:45.360 --> 0:06:47.960 speaking for me personally, I think that's where real money 0:06:48.040 --> 0:06:51.360 is made. I quite frankly, I don't have the ability 0:06:51.440 --> 0:06:56.000 to understand some of the valuations that might surround things 0:06:56.000 --> 0:06:59.560 that are that are popular that have no history to them. 0:06:59.600 --> 0:07:02.880 I do understand what happens when you have economic cycles, 0:07:02.920 --> 0:07:05.520 and when you have a building cycle or a car 0:07:05.640 --> 0:07:08.640 buying cycle. Those things tend to happen over and over. 0:07:08.839 --> 0:07:11.920 So at least speaking for myself, that that is the 0:07:12.000 --> 0:07:15.400 part of the you know, the investment spectrum that we 0:07:15.520 --> 0:07:17.920 choose to to exist. And so I think we can 0:07:17.960 --> 0:07:20.080 make money here. I'm not sure that I could make 0:07:20.120 --> 0:07:23.360 money elsewhere, but but we make money in in this fashion. 0:07:23.760 --> 0:07:27.600 What don't you like, Scott, I think I don't like 0:07:27.840 --> 0:07:31.400 things that are defensive and expensive, right, and so if 0:07:31.440 --> 0:07:34.840 you take a look at both of those, um, you know, 0:07:34.960 --> 0:07:37.320 long dated sovereign debt would be right at the top 0:07:37.360 --> 0:07:41.280 of my mind. Any time that you have historically high 0:07:41.480 --> 0:07:45.560 demand for an asset class where the expected returns are 0:07:45.560 --> 0:07:49.240 the lowest on record, I think we normally call that 0:07:49.320 --> 0:07:50.960 a bubble. And I'm not trying to say we're in 0:07:51.000 --> 0:07:54.360 a bond bubble. I'm just saying that historically were places 0:07:54.400 --> 0:07:57.960 we've never been before with negative yields, and generally speaking, 0:07:58.080 --> 0:08:01.520 capital does not sit comfortably in a place where it 0:08:01.720 --> 0:08:04.680 is going to be destroyed, even if it's just a 0:08:04.720 --> 0:08:08.000 little by little over time. The second place are more 0:08:08.040 --> 0:08:10.920 defensive areas, and we've seen kind of a run up 0:08:11.360 --> 0:08:14.720 at the last half of two thousand and fifteen the 0:08:14.840 --> 0:08:19.800 first half of this year in utilities and consumer staples, 0:08:19.840 --> 0:08:23.360 so you know soap makers and uh, you know, soft 0:08:23.440 --> 0:08:27.280 drink makers. I think that those valuations on a historical 0:08:27.320 --> 0:08:30.040 basis are stretched to their highest. So I think I 0:08:30.040 --> 0:08:32.760 would want to I would want to be turning down 0:08:32.880 --> 0:08:36.760 or decreasing my allocation to those areas and try to 0:08:36.960 --> 0:08:41.960 increase allocations to UH not only UH materials, energy, but 0:08:42.040 --> 0:08:46.200 also industrials and put costs er or down the consumer 0:08:46.600 --> 0:08:50.560 discretionary which they've had a hard time over the past 0:08:50.600 --> 0:08:54.000 twelve months. But I think we're beginning to see a 0:08:54.160 --> 0:08:57.280 turn in that we've got a very healthy consumer. Once 0:08:57.320 --> 0:08:59.360 they decide to start buying a little bit more, I 0:08:59.360 --> 0:09:02.320 think it will have a huge difference, UH in the 0:09:02.360 --> 0:09:06.720 price of the consumer discretionary area. How about the price 0:09:06.960 --> 0:09:12.280 of emerging market assets, well, emerging market many of them 0:09:12.440 --> 0:09:15.480 UM and if you know, we're talking maybe Eastern Europe, 0:09:15.480 --> 0:09:19.880 we're talking parts of Asia, mostly Latin America. A lot 0:09:19.920 --> 0:09:23.040 of those countries, their fortunes are tied to what they produce. 0:09:23.280 --> 0:09:26.559 And since commodities that kind of bounced, you know, to 0:09:26.679 --> 0:09:29.160 the first six months of the year, we've seen emerging 0:09:29.200 --> 0:09:33.120 markets bounce as well. In the In the case of 0:09:33.880 --> 0:09:37.240 Latin America, we've seen a number of governments change. We've 0:09:37.240 --> 0:09:40.880 seen the government in Argentina changed to a very pro 0:09:41.000 --> 0:09:46.080 business stance. We're seeing Brazil, besides the Olympics, we're seeing 0:09:46.640 --> 0:09:50.480 President russaf has been impeached. She is out of office 0:09:50.520 --> 0:09:53.599 for six months. While she's put on trial. But essentially 0:09:53.640 --> 0:09:57.440 we're seeing the Brazil at the very end of of 0:09:57.520 --> 0:10:03.080 a historically long u bear market and a very brutal 0:10:03.520 --> 0:10:08.560 recession that they've they've uh they're trying to overcome. I 0:10:08.600 --> 0:10:10.720 would expect them to come out with a much more 0:10:10.760 --> 0:10:15.240 pro business attitude. Venezuela may collapse any day, but this 0:10:15.360 --> 0:10:17.880 is changed for the better. This is not changed for 0:10:17.920 --> 0:10:21.080 the worst. It's actually changed for the better. We would 0:10:21.160 --> 0:10:24.319 argue it's at the end of a very long bear market, 0:10:24.440 --> 0:10:27.360 it's not at the beginning. We would we would continue 0:10:27.360 --> 0:10:29.920 to put assets there if you're looking for income. We 0:10:29.920 --> 0:10:33.560 think emerging market debt is in great shape, and I 0:10:33.600 --> 0:10:37.600 think if you can stand the volatility, emerging market equities 0:10:37.600 --> 0:10:40.760 are just in the very first innings of their bowl market, 0:10:40.760 --> 0:10:43.560 where one might argue that the United States is in 0:10:43.679 --> 0:10:47.040 maybe the latter number of innings in our bowl market. 0:10:47.679 --> 0:10:50.839 Scott Collyer he is the chief executive officer and the 0:10:50.920 --> 0:10:55.480 chief investment officer of Advisor's asset management, helping to manage 0:10:55.520 --> 0:10:59.840 more than sixteen and a half billion dollars of customer assets. 0:11:00.200 --> 0:11:03.679 He's staying away from what he describes as the defensive 0:11:04.120 --> 0:11:07.600 and expensive We're gonna take you through to the clothes 0:11:07.640 --> 0:11:10.760 on Wall Street. This is taking Stock. I'm pim Fox. 0:11:11.120 --> 0:11:12.400 This is Bloomberg.