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David Dreman is the chairman of Dreman Value Management, and the author of Contrarian Investment Strategies: The Psychological Edge. He has been a columnist for Forbes since 1979. Recently, he sat down with Steve Forbes to talk about why he likes energy stocks, the dangers of high frequency traders and why he thinks we’re headed for big gains. Video and a transcript of the second half of their conversation follows. Watch the first half here.
Forbes: Now, do you believe a weak dollar is a friend to the stock market?
Dreman: It should be. But given this current situation, the dollar is not doing what the Fed would like it to do. The euro has dropped almost 20% against the dollar. As you mentioned before, these companies are stumbling, our countries are not doing extremely well. I don’t think they’re going to go down or have major recessions.
But as bad as growth is here – we’d like it much faster – it’s better than abroad. And I think our banking situation has been handled – maybe not in any optimal way, I think far from optimally – but still it has been handled better than the euro. So I think the United States might be the place to be.
Forbes: Any financials like Hartford? Do you still like that, or?
Dreman: Yeah, I do like Hartford. I think Hartford just lost a lot of its capital in the subprime fiasco. But it’s got really good earnings power, and I like the stock. They have a preferred out, that’s a convertible preferred that we call in a couple years, but it’s yielding close to 10%.
Buying Oil and Gas Stocks
Forbes: And oil and gas – oil is going up again, even though inventories are out there. Which ones do you like? And you said recently, I think, that the integrated ones, like an Exxon, you feel there are better values out there. So first let’s do the oils and the gas.
Dreman: Right. Well, actually the Exxons, and the Chevrons, and the Conocos, they’re good companies. They’ll make reasonable money, and they’re excellent blue chips to hold. I think if there’s higher inflation, and also the fact that we’ve used more oil than we’ve discovered every year since 1982, with the exception of 2009. And then we were maybe half of 1% below what we used in 2008.
I think that oil is really not in short supply, but its demand is still there. And we have some excellent exploration and development companies. They also own gas, which we can go into later, but they have major oil reserves. Apache, Anadarko, Devon, would be three that I’d look at.
Forbes: Dominion? Chesapeake?
source: forbes.com
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