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Give Me Another ‘Lost Decade’

07/22/2011 2:30 pm EST


John Buckingham

Editor, The Prudent Speculator

Stock investors who pick their poisons and remain patient have almost always made a profit, even in times of deep market trouble, which is why John Buckingham of The Prudent Speculator is bullish on equities for the long term, he says in this exclusive interview with

John, what is your long-term outlook?

Well, I’m very optimistic about equities for the long term. Part of the reason for that is historical precedence. Stocks have rewarded investors over the long term with gains in the 9% to 11% range. I think that will continue.

We are in a very low interest-rate environment. I know rates may spike up a little bit, but we do have low interest rates. We still have low inflation rates by; of course, the government measures—assuming you don’t have to eat and drink, right? Or put fuel in your car.

But we do have a favorable environment, as far as I’m concerned. Corporate profits have been very strong. I think we’ll continue to have solid earnings.

Valuations just are not excessive. You have a forward P/E on the S&P 500 these days of about 13 or 14. I think that’s very attractive, especially in the low interest-rate environment. So, definitely optimistic for the long term.

Of course, I’m an equity guy who believes in the stock market, and just like Warren Buffett, historically equities have rewarded those who have been patient and stayed with it.

Except for this last decade, when a lot of people didn’t get anything back. You’ve got some younger investors who are just totally afraid of the stock market.

That’s the interesting point. If you look at the major averages like the S&P 500, or some of the blue-chip indexes, yes, definitely the stock market had a lost decade. But if you can go beyond that and look at the small and mid-cap space…those stocks actually did very well.

So, we have a situation where the headlines may mask what actually went on in the stock market. I think there was great opportunity in the “lost decade.” Give me another lost decade. I’ll be very happy because our mutual fund did very well during that time span.

Are you more of a stock picker instead of just following the indices?

Absolutely. I think there’s a role for active managers out there. It’s been proven, especially during the last decade, where many active managers outperformed.

A lot of the larger cap, the technology stocks, after that bubble burst, those stocks were not attractively priced. But, there were many companies that were. So, our job is to go and focus on the undervalued stocks…we’re value managers, and historically if you can buy inexpensive stocks, you have done very well over time.

Do you focus just on the US, or do you look at international markets as well?

Well, we only invest in stocks that trade on the US exchanges. So, it has to actually be traded, but it could be an ADR.

We do have many companies in our portfolio that have broad international exposure, as well as some individual ADRs. Companies like Novartis (NVS) and Nippon Telephone and Telegraph (NTT), those would be two of the ADRs that we own.

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