market folly

FPA Crescent Fund's Steve Romick recently appeared on CNBC's Squawk Box to talk about his approach and his top two stock picks.  FPA has returned 19.7% over the past year and has seen 9% annual returns over the past decade.

Romick's Picks

The fund manager likes Renault (RNO), since it's out of favor in Europe at the time.  He cites the company's stakes in Nissan, Volvo, and Daimler as being worth more than the value of Renault.  They're long RNO and short Volvo & Nissan, saying that "the market is paying us to own Renault."

OmniCare (OCR) was his other pick as he argued the business will benefit from the aging of America and new management.  Sticking with the healthcare space, we've also posted up on potentially why Romick owns WellPoint (WLP) as well.

He also likes farmland is his thesis there is that it will benefit in an inflationary environment (and decline in the US dollar).  He likens it to gold, but unlike the metal, he says it has a positive return and no cost of carry.  They couldn't own as much of it as they want due to liquidity. 

We've detailed in the past how Michael Burry has advocated owning farmland in the past.  Burry, if you're not familiar, was one of the investors that profited from the subprime bubble.


FPA's Investment Approach

He mentioned that his goal is to "provide equity rates of return with less risk than the market."  They invest across asset classes.  While equities are the largest portion of their portfolio, they also do high yield bonds, mortgage home loans, farmland, etc.  They currently hold around 30% in cash as well.

Romick argues against owning bonds at the moment, save for some corporate bonds.  Past posts on this site have highlighted how Omega Advisors' Leon Cooperman has been outspoken against bonds.

Embedded below is the video of Romick's interview with CNBC:



Romick will be presenting new investment ideas at the Value Investing Congress in Las Vegas next May and our readers receive a discount to the event here.