I haven't written any since right before the turn of the New Year...that being said, I hope everyone had a great and enjoyable one. I just got back from a week in San Francisco, as we were out there meeting with a group of new clients. Speaking of such, I'd like to say hello to all of the individuals we were fortunate to meet while we were out there, and I look forward to working with you over the coming months. I'd like to give a special thanks to Mary Margaret and Jill for being so hospitable and assisting us while we were meeting with and getting to know all of the employees.
Ok, so it's 2012 and what do I (and the other money managers and market watchers I work with) expect in the coming months. Here's a list.
1. I'm positive on the prospects for the U.S. stock market as the economy continues to grow (albeit at a slow pace). I expect that in due time, our economy and market will become less correlated to the financial problems facing Europe as a lot of that has already been "baked into the cake".
2. Because of my positive outlook for the U.S., I am expecting there to be a large reallocation out of bonds and into stocks over the coming months. Many investors are currently poorly positioned to take advantage of a rise in stock prices and I expect large pension and retirement funds to play catch up as they don't want to miss out on the growth in the stock market (hence why I think we'll see investors selling bonds and buying stocks). In leu of such, I have been and will continue to sell the bond mutual funds I own and move that money into U.S. stocks (either individual stocks or stock mutual funds).
3. Over the past several years, the Chinese stocks market (along with other Asian markets) has performed poorly on the heals of a housing/property bubble and slowing economic growth. From the data that we have seen over the past several months, it appears that the "bubble" is not going to burst like ours did back in 2007-2009, but rather the excess housing and property inventory will be worked out as the Chinese central bank is proactive in handling the problem. The Chinese economy, which is heavily dependent on natural resources and manufacturing, will start to see a slight improvement in overall demand as economies around the world start to stabilize, therefore increasing the demand for such goods/services. With that in mind, I am allocating a small portion of my portfolios to Asian (specifically China and Japan) mutual funds as I expect these funds to have double digit returns this year. A great mutual fund to own is the Mathews Asian Growth and Income Fund, which has a stellar track record and also pays a handsome fund dividend of 2+%.
4. Similar to what I mentioned above regarding stabilizing economies around the world (minus central Europe), I'm watching Latin America, as the geographic region could start to see some higher demand for their agricultural and natural resources (both of which are the main drivers of economic growth). A good way to play this idea is to either buy some individual stock names in Brazil (definately not Venezuela), or by owning a Latin American mutual fund. Some great Brazilian stocks to own are Banco Bradesco (BBD), Petrobras (PBR), Companhia Siderurgica (SID), and Itau Unibanco (ITUB). These companies are a mix of natural resource, banking, consumer congloerates and energy. A good Latin American fund is the Fidelity Latin American fund, which also boasts incredible track record. To note, owning a mutual fund is usually a better way for most investors to own stocks in a specific geographic region as the volatility (ups and downs) is less frequent.
5. The banking sector and the companies therein will be some of the best performing stocks this year as the sector is coming off of a horrendous year due to the financial crisis in Europe. As I said, the financial crisis in Europe still remains but one cannot deny that our economy is stabilizing and starting to slowly grow, and the financial sector will be one of the biggest beneficiaries of such. I also expect there to be a wave of mergers and acquisitions in the space as stock prices are historically low as several financial companies are trading below their book values. Some of my favorite financial stocks are Citigroup, SunTrust Financial, Bank of America, Etrade, and Synovus. Several of these companies are seeing large insider buying of their own stock by company executives (which is usually a great sign of things to come).
That's about all for now, as I need to get back to returning phone calls and reallocating portfolios. Simply put, I like U.S. stocks, and I am slowly starting to move money out of bonds to reflect such. I am by no means saying that now is the time to buy buy buy, but I am taking down days in the stock market as opportunities to buy stock.
Sorry for the long post but as you can probably tell I've had a lot on my mind. Thanks again to all the wonderful people out in San Francisco, it was great being out there.
