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Giving Up on Value Is a Sin



Rule 20


Patience is a virtue — giving up on value is a sin.


I see so many people throwing in the towel on companies that have real assets and real worth just because they aren't working now, and it angers me. I recall an interview I did a year or so ago with the CEO of Superior Industries (SUP - news), a wheelmaker for auto companies. At the time, its stock was at a 52-week low. It had a big short position. It was getting lumped in with ne'er-do-well companies.

And I asked myself, "Why sell that one? It's already down so much, it has a clean balance sheet, it can make acquisitions, buy back shares, do so many things." But people didn't want to wait until the cycle turned to get the profit that most certainly would come to those who waited for Superior. That's because it was cheap and good. It was cheap because it sold at book value; it was good because it had plenty of business.

Or take the situation I see developing in banks like J.P. Morgan (JPM - news) and PNC (PNC - news). If the Fed doesn't tighten forever — which it won't — at a certain point, the value in these banks will be realized. Great brands, great branches.

But no one cares.

At any given moment, I like to have a portfolio of what's working now and what will work in the future. I think that after 16 tightenings, you have to start thinking that the Fed will have an impact and when it does, the Fed will be through. When the Fed is through, you are going to want to own the financials. I think they are a lot easier to own now than Phelps Dodge (PD - news) or U.S. Steel (X - news) are.

It takes patience. Most don't have it. If you don't, frankly, I think you should let someone who has patience run your money. You don't deserve to.

And by the way, stocks like EMC (EMC - news) and Cisco (CSCO - news) and Sun Micro (SUNW - news) don't qualify. They are expensive, not cheap. They don't represent value ... at these prices.