Legg Mason CIO Bill Miller says now is the time to snap up healthcare and tech stocks.
“We believe now is a good time to buy what's on sale, and a bad time to buy what's been marked up, just as it was in 2000,” Miller writes in the Financial Times.
"Where is the value in the market today? In the assets people do not want, that have no momentum, and that are cheap."
Three broad sectors and two broad themes stand out, says Miller. The S&P 500 sectors are financials, technology and healthcare, which are in the bottom decile of their historical valuation ranges.
“This means they have been more expensive 90 percent of the time over the past 60 years or so,” Miller says. “The themes are U.S. mega cap and deep value, meaning low price to book value and high free cash flow yield.”
Miller says he doesn’t know if commodity prices have reached a level that fully reflects the concerns about supply and that may begin to destroy demand.
“What I do know is that there is a lot of price in these assets, a lot of momentum, a lot of belief, and not, in my opinion, a lot of value,” he says.
Global investors have tempered their optimism about the U.S. and world economies and plan to put more of their money in cash and less in commodities over the next six months, a Bloomberg survey found.
Almost 1 in 3 of those questioned say they will hold more cash, while 30 percent intend to reduce investments in commodities, according to a quarterly Bloomberg Global Poll of 1,263 investors, analysts and traders who are Bloomberg subscribers. Both results were the highest since the survey began asking the question last June.
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