Jeremy Siegel
A finance professor at the University of Pennsylvania's Wharton School, Jeremy Siegel made his name as a stock market guru in the 1990s with his common-sense Stocks for the Long Run. But how he really made his chops was with his March 10, 2000, appearance on CNN Moneyline predicting a tech-stock collapse. That was the day the Nasdaq closed at 5049, before losing over 75 percent of its value in the next 2 1/2 years. Now, Siegel is arguing that foreign markets and boring value stocks that pay dividends are The Future for Investors.
Q. Your book could be summarized as advising investors to just buy low.
A. Well, I cannot deny I think there are opportunities to buy low. But when I researched what I called the " corporate El Dorados, " the companies which did very well over long periods of time [such as Altria, General Motors, and Merck], they were not cheap. But they had much higher growth than average. But a corollary to buy low is don ' t buy high. That means stay away from IPOs and the new stuff that goes into the popular indices.
Q. But many tried-and-true companies -- tobacco, car, and drug firms -- seem like risky bets.
A. They have all had problems in the past, like when Coke launched New Coke. Disney was in the dumps for a while. Not every one is going to recover. That is why diversification is so important.
Q. You are now a big fan of dividend-paying stocks.
A. Yes, that ' s a more recent tilt for me. I started looking at them in 2001. I like cash cows. I like cash flows returned to the shareholder.
Q. Because of changing global demographics, you recommend foreign stocks. But you note that many Chinese companies are overvalued. So how should an investor go foreign?
A. I ' m generally not one for buying individual stocks. I was talking about the [index funds]. I ' ve been a great diversifier. My most important message is the tilt. By tilting in this direction you get higher return with lower risk. I think you should maintain at least 50 percent of your portfolio in indexes like the total stock market index.
Q. Aren't you afraid that readers will rush to value and divi dend stocks and destroy the premium they ' ve returned?
A. If there are enough of them to move a multitrillion-dollar market, God bless ' em. But no matter how many books are written on value, people still go after the tech stocks.
Q. Are we in another bubble?
A. The market is fairly valued. -Kim Clark
This story appears in the January 31, 2005 print edition of U.S. News & World Report.
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