'This recovery has legs,' Gamco's Howard Ward says

Howard Ward wasn't, in fact, wearing bull horns during his presentation Tuesday morning at Schwab Impact in Washington D.C., but given his outlook for stocks, one could be forgiven for hallucinating it. The chief investment officer for growth equities at Gamco Investors Inc., painted a rosy picture for stocks, suggesting the bull market that's been roaring since the great recession ended is far from over. “This recovery hasn't gotten the respect it deserves,” he said. “The recovery has legs. We've had 52 months of growth and counting. Next year will be the fourth year of record GDP and profits.” While there's been a lot of talk of stocks being expensive at their current 15.9 times forward earnings, Mr. Ward said that when inflation is considered, stocks are actually undervalued at that price-earnings ratio. “There are some areas of the market, like Tesla Motors Inc. [TSLA] and Netflix Inc. [NFLX], that look very frothy and scary,” Mr. Ward said. “But the overall market is not expensively priced given the inflation we're seeing.” Historically, stocks have traded at 16.9 times forward earnings when inflation has trended between 1% and 3%, Mr. Ward said. With inflation next year expected to be around 2%, stocks could see their P/E ratios rise to 17 times forward earnings over the next couple of years, he said. Having said that, Mr. Ward doesn't suggest jumping in whole hog if you've missed out on the stock gains thus far. Instead, he suggests dollar-cost-averaging your way into the market at this point.