Tired of the FANGs? Given that we created the name "FANG" five years ago, it does grate on me that we've become endless devotees as they have grown more and more expensive, something that happens when your stock goes up and up and up without any news.
That's why I was so thrilled today to interview the anti-FANG -- Ed Wachenheim -- at CNBC's Delivering Alpha conference Wednesday. Because Ed is about finding value in this market, and he's finding a ton of it that no one seems to be looking for (or at). He's got a list of the least-sexy stocks in the market, a list that outs the lie to the idea that there's nothing cheap in this market.
I want you to write these ideas down, because Ed has an amazing long-term track record -- one that says individual, rigorous stockpickers can indeed leave the hallowed averages in the dust.
First, top of mind, Ed likes the just-reported Citigroup (C) and Goldman Sachs (GS) . Now, Ed's not a flipper. He believes in a two- to three-year time horizon. And over that time period, he foresees the possibility of a dramatic revaluation of these two financials. He believes that investors will come to their senses and start paying dramatically more for these companies' fantastic investment-banking abilities.
That means that given Goldman's earnings power, he thinks this $230 stock could almost double or even more and still not be expensive. The key is that Goldman will start to be recognized as a consistent earnings grower.
Ed is even more bullish on Citigroup if it keeps buying back 10% of its stock each year. He thinks that Citigroup's buyback could shrink the share count so much and its business could be so strong that this $70 stock could be worth $130.
Ed also thinks that the homebuilders are valued like the old days, where they binged on land and always got too aggressive at the top. Now he sees an "asset-light" model developing, where they husband the cash and return it to shareholders and not just roll the dice on land.
He suggests that Lennar (LEN) and DR Horton (DHI) could go much higher, and he points out that mortgage rates are nowhere near historical highs, meaning there's plenty of room for more growth.
But Ed saved his best expositions for the autos -- or more accurately, the truck makers. He said that General Motors (GM) could earn as much as $8 a share, and given that these companies historically sell for 16 times earnings, that means this $39-and-change stock should be a triple.
Best for last? Ford (F) . Ed says that after years of trying to be all things to all people in every continent, Ford has now pulled back and wants to be profitable everywhere, even if that means shuttering some countries and dropping the sedans that cost so much and make so little (if anything at all).
If Ford did that -- and he thinks it will -- the company can earn $2.50 and trade up to $30. Ford currently pays a 5.5% dividend yield and sells at $11. To me, that's the definition of cheap.
In fact, all of these stocks are so cheap that they put the lie to the notion that there's no real value in this market, as this panoply covers three very big industries.
So, whenever you wring your hands in disdain that the FANGs are all that matters, I need you to recall this common-sense money manager who's beaten so many of those featured today. And he's done it with the likes of autos, housing and banks --three of the market's most out-of-favor groups.
