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Allmon: A Look at a Legend
08/12/2005 12:00 am EST
Few in the advisory world earn the status of "legendary," but one who does is Charles Allmon. Despite his long-standing bearishness, he still ranks among the industry's top performers. Here, Peter Brimelow, in a feature on Marketwatch.com, looks at the value investor.
"Charles Allmon has been mostly in cash since 1986 and he currently has an 80% cash position. Nevertheless, his fundamentals-based, value-oriented stock picking has been so successful that his overall cash-plus-stocks portfolio still ranks in third place on a risk-adjusted basis among the letters followed by the Hulbert Financial Digest since mid-1980s. His stock picks alone would make him one of the top-performing letters, as he was during 1980-1986. Allmon says he's in cash because there are so few stocks that meet his value criteria.
"This year, Allmon has been moderate on the market, anticipating a mere 10%-20% decline in the S&P 500. Meanwhile, his stock selections change very little. For the last year, he's been holding Altria Group (MO NYSE), Bristol-Myers Squibb (BMY NYSE), Genuine Parts (GPC NYSE), New Plan Excel Realty Trust (NXL NYSE), and Newmont Mining (NEM NYSE). Allmon's comments on these stocks are indicative of his conservative preoccupations.
"Regarding these stock picks, Allmon explains, 'I continue to buy Altria for my managed accounts to gather in that fat 4.5% yield. I dare say that the price will be substantially higher in three years. I also added to Bristol-Myers, which some observers believe could experience a breakout year in 2006. Meanwhile, BMY yields over 4%. Genuine Parts yield around 3%, with higher payouts each year. They're making good progress. New Plan Excel Realty also pushed ahead in a soft market, a good omen. Their cash flow substantially exceeds the cash dividend payout. Newmont's management forecast earlier that earnings in 2005 would be lower than 2004. Keep in mind that gold took a dip, largely in sympathy with the sale of 47 tons of gold by the European Central Bank between Feb. 1 and March 11. That's one of the biggest gold sales in years. I'm surprised that the gold price held up so well."
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