Tags: Leuthold | Sell | Risky | Bonds | Buy | Stocks | dividend

Leuthold: Sell Risky Bonds, Buy Dividend Stocks

Tuesday, 18 May 2010 02:13 PM

Bonds are now a risky investment because interest rates can't stay low for long, says Steven Leuthold, founder and chief investment officer of Leuthold Group.

“Since we think interest rates are headed up, there’s probably as much risk in bonds as there is in stocks now,” Leuthold says.

“Junk bonds have been a major part of the portfolio over the last year and a half, and the returns have been terrific," he says.

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"But we’ve reduced our stake in them from 14% of the portfolio to 3 percent recently. We’ve replaced some bonds with high-dividend yield stocks,” he told BusinessWeek.

Leuthold, whose company manages $4.5 billion, said the economy is rebounding.

“The U.S. economy is improving at a faster rate than most people imagined it would, and the possibility of a double-dip recession is almost nil. The retail and consumer sector isn't great, but even it is coming in with a 3% growth rate year over year,” he said.

The firm’s largest positions are currently in consumer electronics companies such as Best Buy, Panasonic and Sony.

“The consumer-electronics retail sector looks reasonably priced, with 15 percent earnings growth estimated for 2010, and the stock prices of electronics manufacturers have really strong momentum,” he said.

He also recommends investing in clean tech stocks or companies involved in solar power, wind and efficient batteries.

“We can’t live on oil forever. We recommend clients have 5 percent to 10 percent of their portfolios in cleantech, but we tell them to buy it and put it away for 10 years because these changes won’t happen overnight.”

Recent fears in the stock market have pushed investors to bonds and Treasuries, Reuters reported.

"There will be a lot of demand for Treasuries with this flight to quality," said Michael Chang, interest rate derivatives strategist at Credit Suisse in New York.

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Bonds are now a risky investment because interest rates can't stay low for long, says Steven Leuthold, founder and chief investment officer of Leuthold Group. Since we think interest rates are headed up, there s probably as much risk in bonds as there is in stocks now, ...
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2010-13-18
 

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