18 BARRON’S March 16, 2020
that’s almost 5% of GDP, financed ex-
tremely cheaply. It would be hard polit-
ically to get this done without a reces-
sion, but it could be a big positive. The
recession could be mild.
What’s your outlook for bonds?
Unless we get a significant amount of
a lot of earnings growth. Short term,
there will be lowered earnings
expectations.
Becton Dickinson[BDX] is a
medical-device company. It has 85%
recurring revenue, consumables, and
$1 billion in research and development.
It’s investing in artificial intelligence
and electronic medical records and
informatics, but is down on concerns
about China. And, it had an earnings
miss with a pump recall. But we see a
three-to-10-year runway of mid-single
digit sales growth and double-digit
earnings growth.—R.K.
MERYL WITMER
Barron’s: Are you finding any
bargains in the rubble, Meryl?
Meryl Witmer:We have been putting
cash to work. At the start of the year,
everything seemed priced for where it
should trade in two years. We use an
8% to 9% discount rate, which implied
everything should have been 15% to
20% lower—and here we are. It is in-
teresting to see the theory of value in-
vesting play out.
At long last.
Charles Schwab[SCHW] is some-
thing we’re buying. It is sensitive to net
interest income, which will be lower,
but Schwab is a good company that
tries to delight the customer. We think
it will close its acquisition ofTD
Ameritrade Holding[AMTD] rela-
tively soon, which is good. We looked
at the stock before the deal and thought
it was too expensive around $40. Then
it went to $50, and now it is $33. We are
excited by that. Schwab has at least $3 a
share of earnings power over the next
few years. And, it might benefit from
the trouble Robinhood has had.
We’re also buyingPhillips 66
[PSX]. It has a refining business, mid-
stream assets, gas stations, and conve-
nience stores, and a business that
makes plastics from natural gas. That
division is underearning now, but will
tighten up in the next few years. We
expect Phillips to have $10 of earnings
power. We started buying it around
$70; now, it’s $55, and we continue to
buy. We think we’ll be quite delighted.
Phillips has a good balance sheet and a
good capital allocator in its CEO.
Anything else?
We boughtIngevity[NGVT] when it
was spun out ofWestRock[WRK] in
2016 at $25 a share. It went up to $115.
We sold it. Now it is $39. I never
thought we’d get a second bite. Ingevity
makes activated carbon, used in auto-
mobiles to absorb gas fumes. Every car
in the U.S. must have a system that
absorbs gas fumes. The company also
makes specialty chemicals from tall oil,
a byproduct of paper manufacturing.
They are used in adhesives, oil drilling,
pavements, and other things. On the
activated carbon side, there is a growth
engine built in, due to more stringent
regulations roll-
ing out in the U.S.
China and Brazil
have also upped
their regulations.
Earnings could
grow from
around $5 this
year to more than
$6 in a couple of
years.—L.R.R.
WILLIAM
PRIEST
Barron’s: What
lies ahead, Bill?
William Priest:At year end, we were
looking at fading concerns and modest
market returns. By March 9, every-
thing had changed as the spread of the
virus accelerated outside China. If it
spreads through the end of March, a
recession is almost a given. But reces-
sions aren’t the end of the world; they
have happened before. The question is,
how do you fight
this? Monetary
policy isn’t going
to work here. We
need fiscal-policy
solutions. Modern
monetary theory
is coming. We are
going to evolve
from a Milton
Friedman world
to something very
different. Quanti-
tative easing was
the forerunner.
What do youmean, exactly?
Under the Friedman model, the central
bank would create reserves that the
commercial banking system could take
down to make loans. Through that
mechanism, investments would be
made and the economy would grow.
And vice versa: If there was too much
inflation, you took money out of the
system. That model is going away. You
will see the central bank working much
more closely with the Treasury to allow
cheap financing of fiscal budgets. Com-
mercial banks’ role in money creation
will diminish.
If I were president, I would an-
nounce a major infrastructure plan. If
you announce a trillion-dollar plan,
“There is going
to be an
earnings crater.”
Todd Ahlsten
CIO, lead portfolio manager,
Parnassus Core Equity fund
Parnassus Investments
San Francisco“Schwab...tries
to delight the
customer.”
Meryl Witmer
General Partner
Eagle Capital Partners
New York“The leverage
in the system
is huge, and
it is kind of
covered up.”
William Prist
CEO and co-CIO
Epoch Investment Partners
New YorkToo Cheap To Ignore
Our Roundtable experts are snapping up
stocks at bargain-basement prices in a
bet on an eventual market rebound.
Source: BloombergScott Black's Picks
Company / Ticker Recent Price
Oracle / ORCL $44.
United Parcel Service /
UPS
Merck / MRK 72.
Novartis / NVS 75.
Todd Ahlsten's Picks
Company / Ticker Recent Price
Applied Materials /
AMAT
$45.
Becton Dickinson / BDX 216.
Meryl Witmer's Picks
Company / Ticker Recent Price
Charles Schwab / SCHW $30.
Phillips 66 / PSX 47.
Ingevity / NGVT 34.
William Priest's Picks
Company / Ticker Recent Price
UnitedHealth Group /
UNH
$246.
Merck / MRK 72.
Amgen / AMGN 190.
CME Group / CME 168.
Henry Ellenbogen's Picks
Company / Ticker Recent Price
Quaker Chemical / KWR $130.
West Pharmaceutical
Services / WST
James Anderson's Picks
Company / Ticker Recent Price
Illumina / ILMN $214.
Mario Gabelli's Picks
Company / Ticker Recent Price
Herc Holdings / HRI $21.
Crane / CR 51.