2 Sectors Look Like Great Values

Focus: STOCKS

Value investors are finding some great buys these days, especially in IT and health care—and where those two sectors intersect are the best values of all, observes Brian Frank of Frank Capital Partners.

Gregg Early: I’m here with Brian Frank, portfolio manager of the Frank Value Fund (FRNKX). Brian, it has been such a long time since value has really been at the forefront of investors' thoughts. Could you tell us where we are in the cycle, where you are looking for value, and where you are finding value?

Brian Frank: Absolutely. I think the fact that we have been so far from investors' thoughts—the savvy investors—usually means we are at the bottom of the value cycle. It is a fantastic time to start looking at fundamentals.

Most of the value gurus I follow are trailing the market this year, including ourselves, and a lot of growth and momentum stocks are clearly in favor. Just by focusing on the numbers and running a strategy based on valuation, we are finding a lot of compelling ideas, a lot of things that haven’t moved in the bull market, and a lot of smaller stocks especially, that have gotten left behind.

The fundamentals look great, the business line and the stock prices look great, and I think a lot of these small stocks are ripe for buyouts too.

Gregg Early: You’re fairly secular in what you’re looking for. I mean you don’t care whether it’s large-cap value or small-cap value or midcap for that matter.