Nygren hunts hidden gems in an expensive market

Nygren targets cheap stocks with strong capital return programs in a market near record highs.

Nygren Hunts Hidden Gems in an Expensive Market

Bill Nygren, a veteran portfolio manager at Oakmark Funds, says he hunts inexpensive stocks that still return capital to shareholders. With the S&P 500 trading around 23 times forward earnings, Nygren notes that almost half of his holdings have multiples below 12x. He argues that although organic growth may be limited, these firms generate free cash flow that supports buybacks and dividends. "These companies don't have great organic growth opportunities, but they're generating a lot of free cash flow that doesn't need to be reinvested in the business and they do buybacks and dividends because of that," Nygren said on CNBC's Squawk Box.

Nygren’s approach reflects a traditional value tilt in a market where prices sit at or near record highs. If free cash flow remains robust and buybacks continue, cheap names can compound value even without strong growth. The strategy hinges on discipline in capital allocation and the ongoing willingness of companies to return cash to shareholders. It also depends on macro stability, including tariffs and broader economic momentum, to avoid a sudden rerating of earnings.

Highlights

The next market cycle will test whether this cash return driven approach can endure.