T Rowe Price equity CIO and portfolio manager John Linehan
joins us this morning.
He manages over $18 billion for their equity income fund.
John, good to see you.
Thanks for joining us.
Good to be here.
Talk more about what you think works if in fact
we are in a new kind of era.
Well, I'm not sure we're in a new era.
First of all, this last rate cuts been very well
expected from the marketplace for quite some time.
I I think dividend paying stocks right now are a
very attractive, the valuations are fairly compelling and over time
people might not realize this, but dividend paying stocks actually
outperformed the market over a longer period of time.
When we look right now there, there are a number
of names that we think are attractive both from a
defensive perspective as well as from an offensive perspective.
Yeah, I was looking at KMB right UPS some others.
Do they, do they naturally lead you into say for
example, packaged goods?
Now what I'd say is first of all the our
strategy, what we're trying to do is find companies that
have a compelling balance between attractive fundamentals, attractive valuation and
also have dividend yield.
We're not going to stretch and buy companies just because
of the dividend yield.
But in case of Kimberly-Clark, I think it's a very
attractive defensive name.
It's the number one or two player in its three
categories, which is bath and tissue, infant care, which is
diapers and training pants, as well as feminine care.
The company is trading in a very significant discount to
the market on a relative basis into its biggest competitor,
Procter and Gamble.
There is a fair amount of opportunity just from a
valuation perspective and the yield at 3.8% is a pretty
attractive way of generating income.
At the same time having good exposure to a company
that we think's undervalued.
In the case of UPS, that's more of a cyclical
play and it's going to be more responsive to the
economy improving from here.
Obviously, if people, if the market stimulated, people are going
to be buying more packages, businesses are going to be
shipping more goods and UPS should be a beneficiary of
that.
And with a 5% yield, we think that's a very
compelling opportunity.
And from a valuation perspective, it's trading and basically decade
lows on a well evaluation basis.
We've had some folks point to old school industrials and
materials.
I noticed Weyerhaeuser here.
How do you think that fits in relative to names
like Kimberly?
I think warehouse is a very attractive cyclical play.
You know with the Fed cutting housings can be more
attractive.
Weyerhaeuser is the largest lumber producer in America as well
as the largest timberland owner.
Right now, over 1/4 of the lumber industry is operating
below cash cost.
Either prices are going to have to improve or you're
going to see significant supply curtailment.
Both should be advantageous and positive for Weyerhaeuser.
Does this kind of playbook, John, suggest that you think
the rest of the market where there is momentum in
mega cap tech and AI and even infrastructure build out
is the word?
Do you think the valuations there are overly rich?
I, I, I don't want to, I'm not sure they're
overly rich.
I think that there's a lot in AI that we
we need to be responsive to and I think it
is going to be a continuing secular theme for the
economy.
But as an example, a company like Amarin, which is
an electric utility based in Missouri and Illinois, they're going
to be able to take advantage of rate based growth
from you know continued on demand from from data centers
from other opportunities for people to incorporate AI, which is
going to create additional electric generation demand.
Amarin said name that right now has a compelling dividend
yield, attractive valuation and we think's well set up for
that.
I think the companies we're talking about are just very
attractively valued.
It doesn't mean that other parts aren't well valued.
It's just there is a very compelling element from both
evaluation as well as a fundamental setup for a number
of the names in our portfolio.
Yeah, that's a good point.
And certainly markets going to get some fresh eyes on
it if in fact we're in the midst of a
new kind of cycle regarding monetary policy.
Appreciate it very much, John, as always.
Good to see you, John Lennon, T Rowe Price.