KLEINSCHMIDT: CONTRARIAN VALUE

November 7, 2014

Tocqueville Fund’s Robert Kleinschmidt prides himself on being an independent thinker. In his exclusive interview with WEALTHTRACK he does not disappoint. While the rest of Wall Street has been expecting the Federal Reserve to raise interest rates he says they won’t, and while most investors run from troubled stocks he finds gems among them. His deep value approach has generally worked. Under his stewardship, the 4-star rated Tocqueville Fund has delivered market and category beating returns.

WEALTHTRACK Episode #1120; Originally Broadcast on November 07, 2014

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Robert Kleinschmidt
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ROBERT KLEINSCHMIDT

Portfolio Manager, 
Tocqueville Fund

Consuelo Mack

No matter what you choose to credit, the Republican juggernaut in the midterm elections, European Central Bank head, Mario Draghi’s willingness to consider more monetary stimulus, or the relentless drop in oil prices, the markets are trading at new highs.

Even the widely followed VIX, the “CBOE Volatility Index” which measures expectations for near-term market volatility has subsided again, having picked up in the last couple of months.

A recent quarterly survey of financial advisors by Eaton Vance found that volatility is a top concern for them and their clients right now, followed by generating income, capital appreciation and reducing taxes.

One source of market volatility is the prospect of a change in Federal Reserve policy,  from one of extreme ease over the past five years to possible tightening.

But is this fear justified?

Not necessarily!

In a recent report to clients Wall Street’s number one economic research team,

ISI Group wrote “Fed Tightening is Not Necessarily Bad for the Stock Market”.

They gave two examples.  One was from 1994 to 2000. The key fed funds rate more than doubled from 3% to 6.5% in the period, yet the S&P 500 increased three fold! However it was not without market drama. There were five corrections averaging  12% declines in the six year period.

The other example was from 2004 to 2007 when the fed funds rate skyrocketed from 1% to 5.25%. The market increased 30% during those years and experienced five market corrections averaging 7%.

This week’s guest is not worried about the Fed tightening at all. Despite being a bear on oil and gas prices he is finding value in the energy sector and even with the markets trading at all-time record highs he is investing. He is a noted contrarian investor who has appeared exclusively on WEALTHTRACK over the years.

Robert Kleinschmidt is the CEO, President and Chief Investment Officer of Tocqueville Asset Management, a firm with about $12 billion in assets under management, much of it for high-net-worth individuals and institutions around the world, but also including several mutual funds.

He has been the portfolio manager of the firm’s flagship, 4-star rated Tocqueville Fund since 1992. Over the last 15 years, the deep value, stock focused fund has delivered 8% annualized returns, far outperforming the market and its Morningstar Large-Blend category.

Kleinschmidt prides himself on being an independent thinker. In this exclusive interview he does not disappoint. While the rest of Wall Street has been expecting the Federal Reserve to raise interest rates he says they won’t, and while most investors run from battered down stocks he is finding gems among them. He will name names!

If you’d like to see the show before it airs, it is available to our PREMIUM subscribers right now.  We also have an EXTRA interview with Kleinschmidt, available exclusively on our website.

WEALTHTRACK is now available on a YouTube Channel!  So if you are unable to join us for the show on television, you can watch it on our website, WealthTrack.com, or by subscribing to our YouTube Channel.

Have a great weekend, honor the men and women who have served in the Armed Forces on Tuesday, Veteran’s Day and make the week ahead a profitable and productive one.

Best regards,

Consuelo

Mathews Asia

TAKE A LOOK AT MUNICIPAL BONDS

  • YIELDS ON HIGH-YIELD MUNICIPAL BONDS WERE SIGNIFICANTLY ABOVE THOSE ON IRAQI GOVERNMENT DEBT
  • PERCEPTION OF RISK IN THE MUNI MARKET DOES NOT REFLECT REALITY
  • FEDERAL INCOME TAXES HIGHER THAN THEY HAVE BEEN SINCE BEFORE REAGAN PRESIDENCY
  • YIELD LEVELS ON TAX FREE MUNIS VERY ATTRACTIVE, ESPECIALLY COMPARED TO OTHER TYPES OF BONDS

No Bookshelf titles this week.

PRESERVE PURCHASING POWER

  • Own gold bullion
  •  Not an “investment”
  • Preserves long-term purchasing power

SPECULATIVE BIOTECH Omeros Corp. (OMER) Price: $17.13 on 11/5 52-week range: $6.92 – $18.80 OMER Chart

OMER data by YCharts

Schlumberger NV (SLB)

SLB Chart

SLB data by YCharts

Bill Barrett Corporation (BBG)

BBG Chart

BBG data by YCharts

Amazon.com Inc (AMZN) AMZN Chart

AMZN data by YCharts

Omeros Corp. (OMER) OMER Chart

OMER data by YCharts

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CONTRARIAN VIEWS

The Tocqueville Fund’s Robert Kleinschmidt started nibbling on Apple well over a year ago when the stock was much lower. As a deep value investor Kleinschmidt says he is less enthusiastic about Apple now because it’s not as “dirt cheap” and views it as a “not terribly strong hold.”  I asked him about another aspect to the Apple story, CEO Tim Cook’s recent announcement that he was gay. What impact if any would it have?  


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