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Eaton Vance’s Adam Dunn expects Disney to cut costs and a more balanced approach to Disney+’s growth and profitability under newly reappointed CEO Bob Iger.
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Sometimes being a value investor means going where others don’t want to go.
For some, that means stepping into a controversial situation where the business is not loved because of past transgressions.
wells fargo
(ticker: WFC) and Walt
disney
(DIS) and Aaron Dunn, co-head of the Value Equity team at Eaton Vance.
Wells Fargo, which fell 1.1% last week, has been subject to a Federal Reserve-mandated wealth cap since 2018 and has paid fines to settle misconduct charges. The earnings report revealed that profits were cut in half. But the stock trades at nine times his 2023 expected earnings, and the book value at his one-off.
JP Morgan Chase
(JPM) doesn’t have the same drama, and that’s what makes it appealing.
“There are a lot of internal changes and cost savings that management is bringing [at Wells Fargo]and you have relative valuation tailwinds.
Eaton Vance Value Opportunity
Fund (EAFVX).
He’s also a fan of Disney, but activist investor Nelson Peltz said last week that profits have slumped and the stock has lagged the market in recent years. Dunn expects cost reductions across the company and a more balanced approach to growth and profitability for Disney Plus under newly reappointed CEO Bob Iger, and he expects the final Shares of Disney rose 3.8% last week.
netflix
(NFLX) results have eased concerns about streaming, but are down 30% in the last 12 months.
Another place to look for value is stocks that are too complex for many investors to care about. Some companies are structured as partnerships rather than corporations, complicating issues such as taxation.
Calumet Specialty Products Partner
(CLMT) refines petroleum into a variety of consumer and industrial products and produces “renewable diesel” from soybeans in Montana. Energy Transfer (ET) owns tens of thousands of miles of natural gas pipelines with a dividend yield of 8.5% for him. Both partnerships
Frank Value
Fund (FRNKX).
Bryan Frank, chief investment officer at The Frank Fund, says stocks that some investors shy away from are also worth looking at.He points out “sin stocks” such as
Philip Morris International
(afternoon) and
Altria Group
Manufactures tobacco products (MO).Philip Morris Barons Trading at 17.5 times expected 2023 earnings, Altria trades at 8.9 times, both discounting the average consumer staple but with the same recession-proof attributes. Altria’s dividend yield is 8.4%, and Philip Morris’ yield is around 5%.
Then there are energy stocks, which both Dan and Frank find valuable. As of November 30, Dan’s maximum holdings are
ConocoPhillips
(COP), and
Halliburton
(HAL) is also in the portfolio.Frank owns stock in a refinery company
CVR energy
(CVI), oilfield services company NOW (DNOW), and
NexTier Oilfield Solutions
(NEX).
It may seem strange to own a recession-bound energy stock, but Frank says it has a strong balance sheet, a low price-to-earnings ratio, and a high dividend yield. Supply growth should be subdued, keeping oil prices higher than normal.
There is value.
write destination Nicholas Jasinski at nicholas.jasinski@barrons.com
