NEW YORK (Reuters) - Bond investor and co-founder of DoubleLine Capital LP, Jeffrey Gundlach fancies himself as more than just a fixed-income guru, making successful predictions on everything from shares in Apple Inc. to Japan’s Nikkei stock market index to natural gas and gold.
“Everybody wants to meet with me now. I don’t know why. They didn’t want to before,” Gundlach, 53, said. “I guess they’re curious. Who is this guy? That kind of thing.”
Gundlach was fired from his old shop, the TCW Group Inc, in a dispute that led to a lawsuit, a trial and a settlement.
DoubleLine’s assets under management of $60 billion have tripled since the December 29, 2011 settlement with TCW, the terms of which were not made public. Many of his closest associates left TCW to help set up DoubleLine and his firm has been successful in continuing to attract former employees.
His firm’s success is rooted in a series of prescient calls Gundlach has made on the markets, which has translated into strong returns for his clients, and attention by fans and critics.
Many scoffed when he said at an April 2012 finance luncheon in New York that investors should “short” Apple, then trading around $560, because it was going to $425. Soon after, that’s what it did, with Apple breaking below $400 earlier this year after peaking at $700 a share in September of 2012.
When Reuters exclusively reported in March that Gundlach bought “more long-term Treasuries in the last month” when 10-year yields hit above 2 percent than he had in the previous years, investors took notice.
The yield on the 10-year Treasury note now stands at 1.88 percent but not before dipping to 1.65 percent two weeks ago, as figures on U.S. economic growth have softened.
Yields on Treasuries tend to slide on weak economic news.
Gundlach first made his mark in the bond world for being a savvy trader of mortgage-backed securities.
One reason his flagship mutual fund outperformed is its exposure to mortgage debt not backed by Fannie Mae or Freddie Mac. Gundlach believed so-called private label mortgage debt issued by Wall Street firms prior to the financial crisis would rally in response to the Federal Reserve’s easy money policies and its game-changing decision in September 2012 to buy lower yielding government guaranteed mortgage debt.
Gundlach’s flagship DoubleLine Total Return Bond Fund, earned a three-year annualized return of 11.15 percent through April, making it the top performer among U.S. intermediate-term bond mutual funds, according to Morningstar. The fund, which has roughly $41 billion in assets, is up 2.1 percent this year, besting 92 percent of peers.
In a sign of just how much his star has risen, Gundlach, who was anointed “bond king” in early 2011 by Barron’s magazine, will be awarded money manager of the year Thursday by Institutional Investor magazine.
Gundlach said the honor isn’t going to his head. But it is easy for some to look at his latest prediction that Japan’s Nikkei stock market index will hit 17,000 before year-end as nothing more than hubris. After all, the Nikkei, currently trading at 15,096, a level not seen since 2008, is already up 45 percent for the year.
Then again, Gundlach first began predicting the Nikkei would keep reaching new heights back on November 13, when it was trading at 8,661.04.
“It’s going to go higher. It’s going to be 17,000 before year-end, it looks like,” Gundlach told Reuters in an interview this week.
Gundlach said the index shows “no signs of flagging” and that investors who are jumping into stocks in response to global stimulus measures should invest in Japan, whose central bank is engaging in “full force” quantitative easing.
The Bank of Japan said on April 4 it would inject about $1.4 trillion into the country’s economy in less than two years to fight deflation, mainly through purchases of long-term Japanese government bonds in a process known as quantitative easing.
And after gloating at Apple’s slide, he is now something of a bull, at least in the near-term.
Gundlach said he would rather own stock in Apple Inc. than the company’s debt given the low yield on the company’s recently issued bonds. He said he considers Apple bonds “super safe” but Apple shares now seem to be the better trade. Apple closed at $428.85 on the Nasdaq.
“I kind of like Apple these days, just as a trade,” Gundlach said, noting he still thinks the company needs better innovation over the long-haul.
He also said Treasury Inflation Protected Securities, or TIPS, are a “pretty bad” investment right now as inflation is unlikely to rise. “Inflation isn’t really anywhere in sight,” Gundlach told Reuters Insider television.
He also sees increases in taxes which will support municipal bonds that are generally exempt from federal income taxes.
Gundlach also favored U.S. dollar-denominated emerging market corporate bonds rated between triple-B and double-B, which he predicted can generate annualized returns of between 10 to 12 percent over the next 12 to 18 months.
All of these calls have elevated Gundlach into something of a rock star, even in jaded Los Angeles where entertainment celebrities, not money managers, rule the roost.
He was in an elevator at a local Whole Foods grocery store with the actor Mel Gibson and a third person, he told Reuters. But it wasn’t Gibson who caught the other person’s eye, it was Gundlach.
“The guy looks around the elevator and looks at me and says: ‘You’re Jeffrey Gundlach,'” said Gundlach, chuckling a bit.
Reporting By Samuel Forgione and Jennifer Ablan