The Chinese gambling industry, the U.S. housing market and banking companies’ corporate debt are among growth areas in a difficult investment environment, a panel of money managers said Thursday at the Morningstar Investment Conference.
PIMCO’s Mark Kiesel, Invesco’s Meggan Walsh and Yacktman Asset Management's Don Yacktman offered their investment tips as they talked about analyzing corporate balance sheets.
“Most balance sheets are healthy,” says Kiesel, managing director of PIMCO's Newport Beach, California, office. The question he and other panelists tried to answer: Where to invest?
While gambling and energy provide growth opportunities, housing may present a good value investment, and a new-found conservative bent among banks may make their bonds attractive, the panelists say.
Kiesel, PIMCO’s global head of the corporate bond portfolio management group and a senior member of the investment strategy and portfolio management group, says he sees a lot of investment opportunities in Asia, particularly in the booming gambling industry in Macau. Citing expected revenue of $38 billion this year, Kiesel says Macau is five times the size of Las Vegas’ gaming industry. Kiesel says companies involved in Macau present a good opportunity for either equity or bond investments.
Both Kiesel and Walsh say the U.S. housing industry appears to be bottoming out. Walsh, a senior portfolio manager at Invesco, says she likes the stocks of home builders and suppliers. Kiesel favors Weyerhaeuser Co., which makes building products in addition to paper and packaging.
As a bond investor, Kiesel sees bank corporate debt as an attractive investment because banking companies are focused on recapitalizing.
These same companies aren’t “equity-friendly” investments at the moment, he adds.
“The banking industry is building capital,” Kiesel says.”It’s the most bond-friendly” among industries.
All three money managers are very focused on companies’ use of cash.
Having helped establish Invesco's Diversified Dividend Fund in 2002, Walsh is focused on companies that pay dividends. Yacktman, who president and co-chief investment officer of his firm, favors share buybacks and cringes at “dumb acquisitions.” He calls corporate pension liabilities “red flags.”
“While we tend to invest in equities, we look at them like they are bonds,” Yacktman says.
He’s also a long-term investor. Asked what he thought about Procter & Gamble cutting earnings and sales forecasts this week, Yacktman says the stock’s sell-off is a buying opportunity given the company’s strong brand names such as Tide and Pampers.