'Whenever you get pricing that’s this good, historically, it’s always the best time to create wealth': PCM President

The market remains volatile amid the coronavirus pandemic. Payne Capital Management President Ryan Payne joins Yahoo Finance’s On The Move panel to discuss why he thinks now is a good time to invest.

Video Transcript

ADAM SHAPIRO: Back to Yahoo Finance. We are watching a rally on Wall Street, although the indices are off their session highs. A lot of news this morning, a lot of it coming from the Federal Reserve.

But we want to welcome to the program Ryan Payne from Payne Capital Management. One of the things you've been telling folks are the four main reasons to buy into what had been a bear market. Can you go through that with us, please?

RYAN PAYNE: Yeah, so a couple of things you have to think about here, Adam. I think first off is-- look, valuations are a lot cheap. We don't know exactly where they're going to land right now.

But this is my third bear market. I've got the scars to prove it. And whenever you get pricing that's this good, historically, it's always the best time to create wealth.

I think the other thing you have to think about right now is just the dividend yields. You know, they are going to come down a little bit. You're going to see some cuts.

But the market's down a lot, too. So if you look at relative dividend yields to what you're getting on bonds and cash right now, it's just a huge, huge spread. And whether you're a baby boomer who needs to retire, you're not going to be able to retire off a 10-year treasury paying 0.7% or 0.8%, especially when you look at inflation.

And even if you're a millennial right now, dividends are going to be a huge part of your return long-term. So I think that relative value right now, when you look at stocks, is just tremendously-- it's a better deal than anywhere you can get in the bond market right now.

JULIE HYMAN: Hey, Ryan. It's Julie. Good to see you. General Electric became the latest company today to withdraw its guidance, and also said its first quarter numbers were going to be materially below where they just had guided them. I imagine there are going to be more of those.

A dividend yield perhaps is cold comfort if a stock's going to go down another 10% or 20% or 30%, right? So how do you sort of prepare yourself for this earnings season when we're probably going to get a lot of headlines like that?

RYAN PAYNE: That's a good point. But I think what we've got to remember now is the markets are a discounting mechanism for the future, right? So I think a lot of the bad news is priced in.

And especially look at the oil sector. We've already seen I think one bankruptcy last week. But the market now in energy is actually going up a little bit.

So I think what we have to remember here is the other thing about markets is they're very emotional on the upside and the downside. So not only is it a discounting mechanism on the downside, but it usually overshoots. So I have to think here a lot of that bad news.

And you're going to see more bad news come out. That's one thing we know, between coronavirus deaths-- I mean, unemployment today was just abysmal, and the market's up today. Markets are going to get past that information a lot quicker. So I think as an investor right now, you really have to start thinking about the other side of this.

I mean, Gary [? Ko ?] made some great points about you have to start thinking about how we're going to go back to work. Is it people are going to go in shifts and things like that? But at some point invariably here-- I mean, I'm hard pressed to think the economy is not going to get going again.

JULIA LA ROCHE: Ryan, it's Julia La Roche. You just brought up some really good points. You know, the unemployment, the initial claims that we saw today, those numbers. I guess though when you're looking at the markets, and then deciding on where you want to put money, how are you deciphering that? How are you taking into consideration who might be less or even more so impacted?

RYAN PAYNE: Well, I think first off, you want to do it diversified. I've talked a lot about owning indexes versus trying to pick specific companies. Or even if you're going to buy a sector, buy the index right now.

Because invariably the cream is going to rise to the top, right? The companies that are the most well capitalized right now, the ones that have the opportunity to take market share-- because a lot of market shares can be taken if a company's going bankrupt. You're going to have other companies are going to benefit from that. So anything that's capitalization weighted, specifically with indexes, they're going to be the biggest ones when this actually is over right now.

So we're definitely looking at doing it in a diversified manner. I think it's really hard to pick individual companies here. In fact, if you look at most money managers, not only do they underperform for the last decade, but during this pullback in March, they actually underperformed the indexes by like a percentage point. So they're not very good at picking the best place to be either.

I think the other thing you want to think about too is with our portfolios, we're style-neutral, meaning we own everything equal. The things that got hit the hardest are going to probably have the biggest rebound here. So for instance energy is a great example. I mean, you were down to like $20 a barrel. Well, now you're like $25, $26 a barrel on a percentage basis-- that's a huge move off the bottom.

You know, other things like financials as well, which were down like 40% at one point, they're probably going to have the biggest bounce here. So it's hard, but they're the places you do want to be adding money. The stuff that gets hit the hardest is going to have the biggest rebound.

ADAM SHAPIRO: But Ryan, aren't you worried about maybe getting burned? Because with all of this easy money available-- for like Target corporation, which you pointed out, raising about $2.5 billion in five-year notes. They'll make it.

But we're not going to be able to tell some of those who should have gone away with all of that easy money and low interest rates out there. So can't you get burned?

RYAN PAYNE: You could. And that's why diversification is key here, because if I'm Target, and I'm hoping some of these other retailers are going to go out of business-- and some of them will. I don't think any of these bridge loans are going to save-- I mean, Macy's may be here. It may not be here. But that's a lot of market share that these companies are going to capture.

Again, that's why I think doing a diversify here is critical. You know, the thing with investing is you just have to be approximately right. Just buying in here during this dip, I have to think when you look back retrospectively, it's going to look cheap. You know, whether I bought it Dow 20,000, Dow 22,000, it's going to be kind of irrelevant.

So I think being approximately right-- the opposite is approximately wrong. We're trying to be exactly right, trying to pick the right companies that could go bankrupt-- the opposite of that is exactly wrong. So it's kind of like horseshoes or hand grenades here. You've just got to be in the-- the perimeter.

ADAM SHAPIRO: All right, Ryan Payne, thank you so much for joining us, from Payne Capital Management.