Howard Ward runs GAMCO’s growth portfolio, and is charge of billions of dollars of investment capital. He appeared on Bloomberg Wednesday to give a few of his picks. Ward likes Tiffany & Co. (NYSE:TIF), Priceline.com Inc (NASDAQ:PCLN) and Deere & Company (NYSE:DE). I’ll outline his reasoning, and offer a few counter-arguments.
Tiffany is a potential takeover target
Ward identified Tiffany as a potential takeover target. Specifically, he believes that the company could attract interest from a big, European fashion conglomerate like LVMH.
The company also has extensive exposure to the Japanese market. Although the Japanese economy has been sluggish over the last 20 years, the Bank of Japan has pledged to undertake aggressive new policy actions.
The Japanese stock market has rallied tremendously since December, as the yen has weakened. That could fuel a wealth effect, giving affluent Japanese more reason to buy Tiffany products.
On a trading basis, Tiffany & Co. (NYSE:TIF) has been an underperformer in recent quarters, and could be due for a resurgence.7jy32
However, despite the fact that Tiffany & Co. (NYSE:TIF) has lagged the S&P 500 over the last year, shares have actually had a solid bounce since last July, and are up about 37% in the last nine months. Shares trade at a price-to-earnings ratio of 22, higher than the overall market.
And while that Japanese exposure could be a positive catalyst, it could also have brutal consequences. Some money managers, like Kyle Bass, are predicting a full-scale economic collapse in Japan.
Priceline.com has excellent management
Priceline.com Inc (NASDAQ:PCLN) has been a high flying stock over the last few years, but Ward continues to like it. He praised the company’s ability to grow in Europe, despite the continent’s continued economic weakness.
Priceline.com Inc (NASDAQ:PCLN) has exposure to Asia through its subsidiary Agoda, and Ward believes Agoda should be a source of growth in future months. He’s also a big fan of the company’s management team.
The problem with Priceline.com Inc (NASDAQ:PCLN) stock is that it seems to trade heavily on momentum. It’s certainly worthy of being considered a growth stock, but can the company really continue to post growth rates in the high teens?
Over the last year, shares are roughly flat. But over the last four years, shares are up well over 600%.
Analysts have expressed skepticism about Priceline.com Inc (NASDAQ:PCLN)’s future growth. Analysts at Morgan Stanley, for example, downgraded Priceline.com Inc (NASDAQ:PCLN) shares back in January, noting that it would become more expensive for the company to acquire customers going forward.
Deere is a play on agriculture
Ward likes agricultural machinery giant Deere on a long-term basis. Shares are up 5% in the last year, but have still badly underperformed the broader market.
Ward sees this underperformance as providing an opportunity to get in — he notes that shares continue to trade at a discount relative to other industrial names. No doubt, John Deere remains an iconic brand, and Ward believes this brand image is important to the company’s future.
Commodities guru Jim Rogers has long been bullish on agriculture, often repeating that farmers are the ones poised to drive the Lamborghinis in the future. It seems like Ward would agree; he cites growing food demand for his bullish Deere call.
Yet, despite rising to record levels in recent years, commodity prices have been coming down. As analysts at UBS noted when they downgraded the stock back in March, corn prices are expected to fall. In a corn bear market, Deere should perform poorly.
Ward’s track record
I wrote about Ward’s picks last time he was on Bloomberg, roughly a month ago. His picks then have proven to be a mixed bag: Apple Inc. (NASDAQ:AAPL) is down about 10%, QUALCOMM, Inc. (NASDAQ:QCOM) is near flat (but will likely drop over 5% Thursday), and Whole Foods Market, Inc. (NASDAQ:WFM) and Starbucks Corporation (NASDAQ:SBUX) have both rallied near 5%.
There are some interesting trading ideas here, but investors should never blindly follow the picks of experts.
The article 3 Growth Picks from GAMCO’s Howard Ward originally appeared on Fool.com.
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