Market volatility and continuing macroeconomic threats are not good reasons to move out of stocks — particularly energy stocks — according to Stephen Rogers, manager of the California Investment Equity Income Fund Ticker:(EQTIX).
“U.S. equities are one of the strongest places to be in terms of a core portfolio holding,” he said. “There's no attractive yield in Treasuries, and on a relative basis, stocks are more attractively priced than bonds right now.”
Mr. Rogers has managed the $150 million fund for the California Investment Trust since 2003. His total-return strategy starts with an analysis of the S&P 1500 to build a portfolio of approximately 100 stocks with a 30% annual turnover rate.
A key focus is on undervalued companies with attractive cash flow fundamentals, he said. “We want companies that are interested in returning cash to shareholders in the form of dividends and stock buybacks,” he said. “I like to see management do things with cash that supports shareholders.”
Despite the strength of certain commodities, such as gold, Mr. Rogers calls himself a contrarian with regard to the precious metal.
“Gold doesn't have any yield or any real value beyond that people think it might be a currency one day,” he said.
The place to be, he said, is energy.
“I'm a big fan of large-cap oil,” he said. “Right now, the politics in the U.S. is swinging against the current administration, and that will favor energy exploration.”
With that in mind, he is investing in BP PLC Ticker:(BP), Exxon Mobil Corp. Ticker:(XOM), Chevron Corp. Ticker:(CVX), and Apache Corp. Ticker:(APA).
In the consumer sectors, Mr. Rogers likes names such as McDonald's Corp. Ticker:(MCD) and Starbucks Corp. Ticker:(SBUX) as companies that are “insulated from the macroeconomic issues.”
The fund, which has a five-star rating from Morningstar Inc., is down 2.6% from the start of the year, which compares with a 1.8% decline by the S&P 500 and a 4% decline by the Morningstar large-cap-value category over the same period.
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