By Philip van Doorn, MarketWatch
George Young, a portfolio manager of the Villere Balanced Fund, says investors ought to apply the same logic to buying stocks as they do consumer goods on Black Friday.
“If you are interested in buying a pair of shoes and see them in the window for $100, and now see them on sale for $80, you are more likely to buy them,” he said. “What about the stock market? You might take the same attitude.”
In an interview Nov. 26, Young named three small-cap/mid-cap stocks that he believes are particular bargains right now. The fund is operated by Villere & Co., which is based in New Orleans and manages about $2.3 billion, mainly for private and institutional clients. The firm runs highly concentrated portfolios and focuses on, but is not limited to, smaller companies that they are familiar with through meetings with management and competitors.
“There are a lot of intriguing stories” in this market, Young said.
He explained how investors shy away from opportunities:
Three stock picks
Young mentioned three companies he likes for long-term investments, whose shares he believes are attractively priced. All have declined since the end of September:
Here’s how they have performed this year through Nov. 27:
Howard Hughes Corp. /zigman2/quotes/206056706/composite HHC +4.15% builds master planned communities (MPCs) and owns the South Street Seaport in New York. Young said Villere & Co. and its clients have owned the shares for about five years.
Young said it can be difficult for investors to measure the value of this type of company because MPCs require very long-term investments, with the payoff (and most profits) coming from the sale of developed property. He said he and his colleagues were impressed with HHC’s management team.
“We like that the CEO and CFO are incentivized through stock options that are five to 10 years out,” he said. “They cannot sell them until those periods have passed.”
Having skin in the game is a theme that Young touched on when describing how Villere & Co. operates. The four co-managers own the same stocks they recommend for clients and hold in the mutual funds they run.
First Hawaiian’s /zigman2/quotes/209814536/composite FHB +4.29% main subsidiary is First Hawaiian Bank, which has the leading deposit market share in the state. Until recently, the company was 55% owned by BNP Paribas SA /zigman2/quotes/208203789/delayed BNPQY +1.32% . But after three public offerings of shares, that ownership percentage has declined to about 18%, according to Young.
Young said the bank was very well-positioned for loan growth because of the “huge presence” of the U.S. Navy, Air Force and Army, as well as tourism and vacation-home purchases. FHB’s third-quarter return on average assets had improved to 1.31% from 1.15% a year earlier, while its return on average equity had improved to 11.01% from 9.03%. The rising-rate environment has helped, with the bank’s net interest margin expanding to 3.11% from 2.96% a year earlier.
Young said he feels comfortable with FHB’s “stable” management team and said another attractive attribute for the stock is a dividend yield of 3.80%.