The Barron’s magazine roundtable of top money managers and market strategists recently offered a slew of investment ideas that could create profit in the year ahead.
The government debt explosion, stock market correction and modest economic recovery create bargains, the 10 experts say.
They don’t expect a raging bull market, but good stock pickers can thrive. Here’s a quick look at a selection of their picks:
· Felix Zulauf: The world’s leading economies are hitting a wall, says independent Swiss money manager Zulauf. That’s not good news for commodities, he says. “Commodity prices are heading lower. The stock market probably will make its low for the year in late summer or fall. The upside is probably 5 percent, the downside 20,” Zulauf said. He’s shorting basic resources via the DJ Stoxx 600 Optimized Basic Resources ETF.
· Bill Gross: After buoyant growth in the first half of the year, the U.S. economy will weaken in the second half, predicts Gross, chief investment officer at Pimco. Debt reduction is the big theme in the private sector, re-regulation in the public sector. “I recommend high-quality sovereign bonds in the U.S. and Germany,” he said. “These markets will see slower growth and next-to-zero inflation.”
· Abby Joseph Cohen: Goldman Sachs strategist agrees with Gross’ economic forecast. As a result, she sees the Standard & Poor’s 500 Index trading in a range of about 1250 to 1300 for the next six to 12 months. That’s up 14 percent to 18 percent from 1,098 currently. “The selloff in the past two months has created valuation opportunities,” Cohen said. Among the value plays she likes are U.S. Steel, Pfizer, and Occidental Petroleum.
· Oscar Schafer: The U.S. stock market provides plenty of individual opportunities, even though the market as a whole may end the year little changed from the beginning, says Schafer, managing partner of OSS Capital Management. “Company earnings and productivity are improving. There are a lot of cheap stocks,” he said. Schafer recommends global can maker Crown Holdings and health insurer CNO Financial Group.
· Fred Hickey: The government will adopt another stimulus plan, and the Federal Reserve will keep printing money, says Hickey, editor of The High-Tech Strategist. “All exit strategies have been put away. That is why I continue to be heavily invested in gold,” he said. That includes physical gold, a variety of ETFs, and some individual gold stocks. Hickey’s been selling many technology stocks but buying Microsoft.
· Marc Faber: The stock market is oversold for the short term, says Faber, editor of the Gloom Boom & Doom Report. But the longer-term correction isn’t over yet, and the S&P 500 could drop 13 percent to 950 by November before resuming its rally, he says. With a loose Fed policy, investors should stay away from cash and Treasuries, he says. “The only avenue of growth is equities, real estate or commodities, in particular precious metals.”
· Meryl Witmer: “The market is manic,” said Witmer, general partner at Eagle Capital Partners. But within that mania, she sees some attractive stocks. “We're looking at some stocks in the oil-drilling area. We recently bought some Diamond Offshore at about $57 a share.” Witmer also likes Globe Specialty Metals and Packaging Corp. of America, which she says is the lowest-cost producer of containerboard in the United States.
· Archie MacAllaster, chairman of MacAllaster Pitfield MacKay, sees plenty of value in the stock market. “Only one of the 30 Dow industrials — Walt Disney — trades for 15 times 2011 estimated earnings.” Hewlett-Packard, ExxonMobil, Bank of America and Merck are among the bargains. “Don't use leverage, and make sure you have enough cash on the sidelines in case stocks go even lower,” MacAllaster advises.
· Scott Black: “Stocks are statistically cheap,” said Black, president of Delphi Capital Management. “The Fed isn't going to raise rates. You're getting great earnings acceleration. Corporate balance sheets are good. But I advise staying on the sidelines until volatility drops.” He recommends America's Car-Mart and Novellus Systems, a leader in physical and chemical vapor deposition in semiconductor manufacturing.
· Mario Gabelli, chairman of Gamco Investors, sees a lot of opportunity in individual stocks, though he doesn’t expect big gains for the whole market. “Every industrial company we talk to continues to do well,” he said. “The big questions are how do you create jobs and a more favorable environment for small business.” Gabelli is bullish on Sara Lee, Las Vegas Sands, Vivendi, and National Fuel Gas.
Read the entire article at Barron’s (paywall)
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