"Several stocks have passed his meticulous screening process lately, including
Illinois Tool Works (NYSE: ITW), Texas Instruments (NYSE:
TI) and advertising giant Omnicom (NYSE:
OMC). But perhaps most noteworthy is a new stake in Microsoft (NASDAQ:
MSFT).
"Nygren explains that Microsoft has always been an excellent company, but this is the first time that it has slipped into value territory. Back in 1999, the firm churned out profits of $0.70 per share and the stock peaked above $60.
"Today, it earns more than twice that much and there are fewer shares outstanding, yet they trade at less than one-third the price. In addition, Microsoft has over $20 billion in cash and offers a yield above the 10-year Treasury.
"There's a good reason why Charlie Dreifus was just selected Morningstar's 'Domestic Stock Fund Manager of the Year.' He captured that prestigious award by losing less than -20% in a year when many other small-cap stock funds lost more than -40%.
"During the last bear market from 2000-2002, his shareholders enjoyed a +53% gain, while the Russell 2000 sank -41%. What would you expect from an investor who refers to margin of safety as "the central concept in investing."
"Dreifus avoids flashy 'growth-story' stocks and sticks to boring companies with unassailable balance sheets and lofty returns on capital -- not unlike Warren Buffet.
"Dreifus is drawn to cash-rich companies that are trading for less than liquidation value. And he fishes in the micro/small-cap waters, where such bargains are more plentiful.
"Lately, Dreifus has been focusing his efforts on consumer-oriented stocks like children's apparel retailer Gymboree (Nasdaq: GYMB).
"Mario Gabelli is yet another Buffett disciple whose value roots can be traced back to Ben Graham. He employs many of the same research-driven tactics -- from dissecting a company's filings to interviewing its managers.
"Gabelli has developed a proprietary methodology that evaluates the real-world value of a company's balance sheet assets and future cash flow stream to determine its 'Private Market Value' (PMV).
"Since the inception of his flagship Gabelli Value Fund in 1989, this approach has quadrupled a $10,000 investment into more than $45,000 today (or roughly $80,000 before this selloff.)
"And thanks to a recent Barron's Roundtable discussion, we know exactly what his sights are set on now.
"Gabelli points out that there are 240 million cars on the road, many of which have been in service longer than six years (the point that repairs and maintenance become inevitable).
"Because consumers are holding off on new vehicle purchases right now, auto parts distributors like O'Reilly Automotive (NASDAQ: ORLY) are looking interesting.
"Elsewhere, he likes Dr. Pepper Snapple Group (NYSE: DPS), which churns out frothy cash flows and could be a buyout candidate.
"Maine & Maritimes (NYSE: MAM) is another favorite. The electricity transmission/distribution company stands to benefit from investments in green power, and a new line carrying wind-generated electricity to the New England power grid will put a charge in earnings."
