Experts Discuss Investing in a Volatile Environment at the University of Virginia Investing Conference

The chair at Oaktree gave investors attending the sixth annual University of Virginia Investing Conference yesterday a powerful but simple lesson in investing.

“We should be moderate. We should not be volatile. We should be reasonable,” said Howard Marks, chair of Oaktree Capital Management, who is the author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor. “No asset is so high in quality it can’t be overpriced and no asset is so low in quality it can’t be underpriced.” That leaves smart investors with potential, he said.

In fact, he says, the stock market swings like a pendulum, “always in the direction of one extreme. It’s fear versus greed and optimism versus pessimism. It’s celebrating the positive or complaining about the negative. … All we really need to know about this business is that extremes are normal.”

Marks advises investors to “buy when there is little confidence and sell when there is too much confidence. Risk is when there’s too much confidence in the price of an asset,” he added.

The conference — which began Thursday, 14 November, at the University of Virginia Darden School of Business and concluded Friday, 15 November — brings in industry authorities from around the world who help investors find the best strategies to deliver positive returns while tempering risk. Investors and Darden students heard from a string of experts on emerging markets, energy, the U.S. economy and technology. The Darden Center for Asset Management hosted the event.

Technology stocks are riding high, but is the sector dancing on a bubble? Shelby Bonnie, moderator of the tech panel; Henry Ellenbogen, portfolio manager for T. Rowe Price; Scott Ferber, CEO of Videology; and Ned Hooper, a partner in Centerview Capital, don’t think so.

Hooper said, “It’s fundamentally hard to find growth in the marketplace right now. Investors are seeing growth in tech, and the market is paying high multiples for that growth.”

But in the wild world of tech, change can happen in months instead of years: “The consumer is one click away from going with another startup,” said Ellenbogen. “The only thing to know about technology is that changes happen fast.”
Good tech stocks to buy?

Google, even at this entry point, and Netflix, the three experts said.

Kyle Bass, moderator of the energy panel; Jody LaNasa, managing partner with Serengeti Asset Management; Wil Vanloh, president and CEO of Quantum Energy Partners; and Michael Watzky, managing partner of BP Capital Energy Advisors, touted the new developments in oil and natural gas in the United States and the resulting investment opportunities. New drilling technologies such as horizontal drilling and fracking are opening up large new sources of oil and natural gas in the U.S., which has increased its oil production by an astounding 50 percent in the past five years. Some analysts believe the country can be oil self-sufficient by 2020. The country is also shifting slowly to natural gas as a substitute for diesel and coal.

LaNasa urged investors to explore companies involved in building the infrastructure that will be necessary to transport all that oil and natural gas for both use and export.
Two good ones?

He touts Williams Co., which is building a gas pipeline in the northeast U.S. where huge pockets of gas have been found, and Kinder Morgan, one of the largest energy infrastructure companies in the world.

The conference also looked outside the U.S. Joyce Chang, head of emerging markets for JP Morgan Securities, says emerging markets “is no longer a dirty word.” In fact, emerging markets “account for 50 percent of the contribution to global growth.”