Tags: Jaffee | stocks | Pfizer | growth

TCW's Jaffee: Stock 'Valuations Are Very Attractive'

Tuesday, 07 May 2013 11:32 AM

By Dan Weil

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The stock market may already be at record highs, but good buys are still out there, says Diane Jaffee, manager of TCW Relative Value Large Cap Fund.

"We still think the valuations are very attractive, looking at 2.4 for the price to book of the market and 2.1 percent still for the dividend yield of the S&P 500," she told CNBC.

"And importantly, we're still only at a 36 percent payout ratio, so there's more to come. I think that provides a floor for the market." The payout ratio is the percentage of earnings paid out in dividends.

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Jaffee stresses that she's interested in growth stocks as well as dividends. "We want companies that have the internal catalyst for stock price appreciation."

She's bullish on Pfizer despite its disappointing first-quarter earnings report last week.

"They had a little setback on one of their drugs in Europe," Jaffee said. "But their R&D [research and development] pipeline is so super-hot that people are forgetting about that and just concentrating on the dividend yield."

The yield is 3.3 percent, which Jaffee called "luscious."

Another stock she likes is Home Depot.

"It's been a do-it-yourself person driving up the stock and we're just starting to see the pro business come back in the most recent quarter," she noted.

"I think there's still a lot more to come."

Morningstar analyst Damien Conover remains bullish on Pfizer too.

"While the results were a bit weak . . . we remain confident in Pfizer's wide moat, as the company is in the midst of developing several next-generation drugs and launching two new major blockbusters, Eliquis for atrial fibrillation and Xeljanz for rheumatoid arthritis," he wrote on Morningstar.com.

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