Morningstar Fund Manager Of The Year Steven Romick isn’t finding a lot of bargains in the markets right now, but in a recent WealthTrack interview he did discuss some areas that he finds appealing.
Romick said that overall, he doesn’t think asset prices are accurately reflecting the risks in the market, namely the risk posed by the Federal Reserve’s quantitative easing program. While the Fed has avoided big problems so far, he says we’ve still got a ways to go in the QE process. First comes the building of the balance sheet, which we’ve seen, but then comes the reducing of it — and the task of finding someone else who wants to take assets off the Fed’s hands, which has just begun. Romick is confident we’ll see more volatility in the future, saying that governments haven’t ever been able to smoothly manage the economy. Romick adds that, while he’s not that optimistic on the markets, he’s not pessimistic either.
One area Romick is finding good value: aluminum-related investments. Aluminum is trading at historic lows, he says, and demand for aluminum is rising due in part to auto and airline industry demand.
Romick also talks about his contrarian approach. “We’re in the business of looking for bad news,” he says. While others will sell or avoid investments because of bad news, his firm sees it as a buying opportunity. The key, he says, is its willingness to wait patiently for the news to pass.