Michael Holland: “Ridiculously Low Valuations for Great Companies”
Michael Holland, chairman of Holland & Co., was on Bloomberg TV’s “Surveillance” discussing the economy and markets with Tom Keene, Sara Eisen and Scarlet Fu. Holland said positive economic developments in the U. S. (housing and autos) and China could overcome the “dithering” in Washington.
Fu and Keene pointed out the remarkable weakness in the Treasury bond market and posed the question whether this would lead a shift into the equity market. Holland said bonds were going down for the right reason (economic growth prospects).
Eisen remarked that some economists were looking for zero growth in the coming quarter due to the expiration of the payroll tax cut and the debt ceiling debate. Holland responded that this was the reason a great company like Google was trading at 15 times earnings. “These are ridiculously low valuations for great companies,” he added. “If you get a little bit of good news, you’re going to make a lot of money,” Holland concluded.
Eisen pointed out failed predictions in 2012 by hedge fund manager John Paulson (euro break-up), Citigroup economist Willem Buiter (Greece leaving the euro), and Morgan Stanley strategist Adam Parker (7% decline in stocks). Keene defended Buiter saying his prediction was framed over a number of years. Holland remarked that the average hedge fund, the world’s smartest guys, returned less than five percent in 2012, but if you stick with a guy like Warren Buffett, over a number of years you’ll make a lot of money.