Tags: Dump | Bonds | Buy | McDonalds | PepsiCo

Fund Manager: Dump Bonds, Buy McDonald's, PepsiCo Shares

Tuesday, 20 Apr 2010 09:05 AM

The bull market is in its early days, said hedge fund manager Leon Cooperman.

“There’s unanimous agreement that the recession ended in June, July, August of 2009," he says.

"If that’s the case, we’re only six, seven, or eight months into a new economic expansion. Almost everybody — myself included — agrees it’s not going to be robust, but if it matches the average, we have several years of growth ahead of us,” he said.

While he tells Fortune he is not “wildly bullish,” Cooperman predicts the S&P 500 will return 10 percent to 12 percent this year.

“That would be better than bonds and certainly a lot better than cash,” he said.

Valuations of stocks are still good and the market has the potential for an upside in 2010, says Cooperman, whose equities-oriented firm Omega Advisors averaged 16 percent annual returns during its 18-year history.

“The psychology is also good. Individual investors are still pulling out of equity mutual funds and putting money into fixed income,” he said.

Cooperman believes that government bonds are overvalued and recommends lowering those holdings. He also believes that large-cap growth companies with exposure internationally are “undervalued.”

His firm is also “underweighted in high P/E stocks, utilities, and some consumer discretionary companies,” Cooperman said.

He also said his fund is “eclectic” and favors companies such as McDonald's, Microsoft and PepsiCo.

Cooperman recommends energy stocks such as Atlas Energy, Energy 21 and Transocean and health care stocks such as Merck, United Healthcare and WellPoint.

The outlook for an economic recovery is still hazy, Dow Jones reported.

“We're on a path back here, but that does not mean we might not slip in the months during the remaining part of this year. Consumers are nervous because there are still questions about when we will be on solid footing,” said Madison Riley, managing director of North America retail for Kurt Salmon Associates.

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