A leading New York-based value manager Paul Bagnoli is warning people who invest in his fund to be prepared to own companies which are getting all the bad headlines in the press.
Bagnoli was in New Zealand recently to launch a new fund his firm, Bernstein, is managing for Axa.
As a value manager Bernstein tends to buy stocks which are out of favour with the market.
"We get paid to bear the anxiety some people don't want," Bagnoli says.
He says one of the things which Bernstein brings to the process is its research.
"Superior research drives performance," he says. Currently the firm has 160 analysts and is it is highly-regarded by its peers.
Bagnoli says while some people take a simplistic approach to value investing and just buy stocks which have a low book to price ratio.
His view is that such an approach is "naive".
Bernstein's approach is that when a company hits some controversy profits and stock price decline, making the share an attractive value proposition.
The key to making the correct buy recommendation is reached after researching the business and identifying a catalyst which is going to help the stock recover.
If Bernstein can identify a catalyst and see the company has long term earnings growth, plus it has a low share price then it becomes a buy.
Bagnoli says the fund invested in reinsurance companies after the September 11 tragedy in the United States, plus it has taken significant stakes in US railroad companies, because the researchers could see growth.
The reinsurance sector has bounced so well that Bernstein has sold out already, however it generally tends to hold stocks for a full business cycle which is about five years.
Bagnoli says investors often tend to overreact to bad news in the market, plus they struggle to look forward.
A good value manager takes advantage of these situations and often ends up stocks which have been oversold by the market.
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