Star investor Bill Nygren, manager of Oakmark Select Fund, sees plenty of good values in the stock market and specifically likes banks, including Citigroup (C) - Get Citigroup Inc. Report and Ally Financial (ALLY) - Get Ally Financial Inc Report.
Some market participants says the S&P 500’s near doubling from its March 2020 low has left it vastly overvalued. But Nygren disagrees.
“I just don’t think there’s a strong argument against equities,” he told CNBC. “Within the equity market, we still view it as kind of two tiered.
“There are a bunch of stocks that are really cheap, such as financials and energy, and then a bunch of stocks that are really expensive. I think the cheap stocks are cheaper enough that a value portfolio today looks pretty typically valued.”
As for bank stocks, they’re “really cheap despite them having been good performers over the past year,” Nygren said. The KBW Nasdaq Bank Index has soared 71% over the last year.
Citi ended the regular session Wednesday off 38 cents, or 0.5%, at $70.26. It has jumped 53% over the last year.
Ally ended off 50 cents, or 0.9%, at $52.42. It has soared 90% in the last year.
Morningstar analyst Eric Compton puts fair value at $78 for Citigroup.
“Citigroup will depend heavily on the return on the consumer, specifically consumer credit card spending and balances,” he said.
“Purchase volumes are generally picking up as consumer spending has started to come back, but Citigroup is more reliant on overall card balances, which have yet to consistently improve in size.
“It will likely take some more time for increases in purchases to translate to increases in balances, potentially not until the end of the year.”