Finding value
The stock market has roughly quadrupled since early 2009, which makes it tough for Ann Miletti and other value investors to find bargains. But there are still some out there, according to Miletti, who manages four Wells Fargo mutual funds including this one. The bargains are in areas where many investors may not feel comfortable, however. What looks attractive now? The energy space has been tough because investors have been fearful of commodity prices. But when we were oversupplied, it really shut down exploration, so we haven’t had a lot of dollars put to it in the last several years. That’s a positive because you can’t just create new resources in energy overnight. I really like some assets in the Permian (an oil-drilling area in New Mexico and Texas). Some of the names there that I like are Concho Resources, Matador Resources, Parsley Energy. The Permian is still the cheapest shale to drill in, and these companies still have the best inventory of all the companies in the U.S. And oil stocks in general have really not kept up with the price of oil. What worries you most now? I worry about inflation. The one thing we saw in first-quarter results that gave me some caution was some price inflation in certain commodities and other areas where companies had a little bit of a hard time passing on their costs. Some of the industrial companies, some of the distribution companies, even some of the retail companies talked about price-cost issues. Transportation costs were up. Timber prices are up. Other commodities as well, even before tariffs. I know that hasn’t played out in the overall inflation numbers that people are watching, that the Fed was watching, but it typically takes companies a quarter or two to pass those onto their customers. What do you make of the more volatile market? I think volatility is here to stay, and that’s not necessarily a bad thing. It makes it easy to find things that the market ignores, that the market maybe gets wrong or misunderstands, so I think volatility can be a good thing.