“this is the most attractive time to be an investor in my lifetime”
– Ron Baron, May 2009
If you read pages 30 to 31 in Barron’s this weekend, then you, my friend, were Carpet-Bombed with Knowledge from one of the most interesting minds on The Street.
Ron Baron, a 40-year market veteran with over $13 billion under management at his shop, Baron Capital, gave a fantastic interview to Lawrence Strauss. He discussed the coming changes and restructurings that he feels will expand multiples for Wall Street companies and the importance of owning names that will benefit from the turmoil their competitors are suffering through.
Here’s some of the good stuff…
On stocks possibly being too cheap:
Stocks are now selling for less than their replacement cost — that is, what it costs to build the businesses or build the buildings. That’s very important because until profits go up and prices go up for the services of existing businesses, you aren’t going to get more competition.
On what things will look like post-restructuring:
There will be less leverage. There will be less proprietary trading. There will be fewer [leveraged buyouts], and there will be less derivatives trading. The derivatives that are traded will be on exchanges, so you won’t have to rely on counterparties you don’t know.
On the benefit of active management versus buying an index:
With index funds, you are going to be investing in the most successful businesses at that point in time, and at the top of the market you will be massively overweighted in those companies. That was oil and gas in the 1970s and 1980s. In the 1990s, it was technology. Earlier this decade, it would have been financial companies, which you would have invested in at exactly the wrong time.
Baron goes on to talk his book, including bullish bets on energy transmission companies, a casino stock and a jewelry retailer.
Interviews like these are what Barron’s does best; pair a smart reporter with a lucid manager at the right time and you’ve got a great read.
Full Story: Looking Ahead to Restructured Markets (Barron’s)
Full Disclosure: My commentary above is strictly for informational purposes and is not an endorsement of any particular strategy, product or security.