Sonders on the Bond “Bubble”, Hindenburg Omen

In her latest market commentary, Charles Schwab’s Liz Ann Sonders says she doesn’t see a “bond bubble” forming — but she does say that many investors have probably moved too much of their portfolios out of stocks and into bonds.

Sonders notes that Treasury bonds actually outperformed stocks in the 20-year period that ended at the end of the first quarter of 2009, a very rare occurrence that has likely been a big part of why investors have flocked to bonds. “I often hear this as the basis for portfolios now heavily overweighted in bonds versus stocks,” Sonders says. But she adds that that’s no guarantee that the trend will continue. In fact, historically, when such lengthy periods of bond outperformance have occurred, stocks have gone on to produce much higher returns than bonds in the next five years, Sonders says. “Although investors didn’t lose money in bonds, they missed out on strong stock returns by bailing on stocks at the trough of relative performance (like in March 2009),” she says.

“Investors must heed the call of rebalancing and remember that diversification is important both among and within asset classes,” says Sonders. “We’re not bond bubble blowers, but no one ever went broke taking some profits.”

Continue reading ‘Sonders on the Bond “Bubble”, Hindenburg Omen’

Negativity Creating Opportunities, Gabelli Says

Top value investor Mario Gabelli says those who contend buy-and-hold investing is dead are echoing a familiar refrain that has popped up at other points in history, and has yet to prove true. Gabelli tells CNBC that the negative sentiment in the market, and the fact that many investors are turning to quick-trading strategies, are creating big opportunities for those who are sticking with buy-and-hold stock approaches.

Guru Strategy Rating Changes: IBM, Priceline on Move

Each week, we take a look at which stocks John Reese’s Validea.com Guru Strategy computer models have newfound interest in, and which they have soured on. Here’s a look at some of the stocks John’s strategies have upgraded or downgraded today.


Yacktman Likes Pepsi — and Doesn’t Like Market Timing

Donald Yacktman, who has an exceptional long-term mutual fund management track record, is continuing to find a myriad of values in the stock market right now, particularly among big blue chips.

“I haven’t seen a period at least since the early 1990s when so many above-average companies have traded at below-average prices,” Yacktman tells Kiplinger’s magazine, adding that he “drool[s]” at Pepsi, one of his biggest holdings. He also likes other blue chips, including Coca-Cola and Clorox, according to Kiplinger’s.

What Yacktman doesn’t like is market-timing. “What I’ve learned over the years is to not try to predict the market,” he says. “Instead, regardless of where the market is, look for the bargains, look for the outliers.” Kiplinger’s says Yacktman’s “trademark has always been investing in high-quality, large companies when they’re temporarily out of favor.”

Hulbert on Where to Invest if Deflation Hits

Would deflation be bad for stocks? Many investors appear to think so, judging from the market’s recent hiccups after signs that deflation could be rearing its head. But MarketWatch’s Mark Hulbert says that might not be the case — particularly for certain types of stocks.

In his most recent column, Hulbert says Ned Davis Research’s Senior Sector Strategist, Lance Stonecypher, offers some interesting data on how deflation has historically affected different types of stocks. “Perhaps the primary conclusion that Stonecypher reached was that, during past deflationary periods, the industry groups that performed the best fell into two categories: Necessity and Defensive,” Hulbert says. “Examples include Consumer Staples and Health Care.”

Continue reading ‘Hulbert on Where to Invest if Deflation Hits’

ECRI Director: Recovery Real, but Unemployment a “Structural” Problem

Lakshman Achuthan, managing director of the Economic Cycle Research Institute, says he thinks we’re in a “real recovery”, but that the high long-term unemployment rate is part of a structural problem that won’t be cured by the current recovery. Achuthan, whose group has a strong track record of forecasting business cycles, also tells Bloomberg that he’s not sure that the most recent unemployment report is a “game-changer”.

Reese on Stocks the Big Guys Like

With individual investors continuing to shun stocks, Validea CEO John Reese takes a look at some firms that institutional investors — who appear to have driven the 2009 market rebound — are high on in his latest Morningstar column.

“Institutions have continued to buy stocks this summer while the market has struggled,” Reese writes. “According to the research group Lipper, institutional investors added more than $13 billion to world equity funds in June and July while many individual investors were running from stocks.”

The trend isn’t a big surprise given how painful the 2008 financial crisis and market plunge were, he adds. “Given the depth of the bear and the pain it caused, it’s to be expected that individual investors would remain skittish for a lengthy period, even after the market bounced back,” he says. “Institutional investors, meanwhile — either because they are required to have a certain amount of their portfolio in stocks, or because they have more experience in dealing with major market turbulence — should be more likely to buy up shares amid lingering fear.”

With that in mind, Reese looks at three firms with very high levels of institutional ownership — and which pass one or more of his Guru Strategies, each of which is based on the approach of a different investing great. Among the strategies he examines in the article are those he bases on the writings of David Dreman, Peter Lynch, and James O’Shaughnessy. To read the full article, click here.

Tilson: High-Quality Blue Chips as Cheap as Ever

Whitney Tilson says he’s seeing some of the best opportunities he’s ever seen in big, high-quality blue chip equities, but that a bubble is forming in blue chip bonds. Investors, he says, appear willing to accept any yield on safe bonds, but have no interest in buying shares of the safest companies, even though those companies are doing quite well. Tilson also discusses why the next ten years should be better than the last ten for stocks.

Top Fund Manager Sees Hopeful Signs

Thyra Zerhusen, whose Aston/Optimum Mid-Cap Equity fund has beaten about 95% of its peers over the past decade, is seeing signs of hope in the economy, and has been buying on the market’s dips.

According to SmartMoney, Zerhusen bought shares of firms like media giant Gannett and speech-technology firm Nuance Communications when the market declined this year. She says improved earnings in the spring and reports of components shortages are encouraging signs. “I wouldn’t have said it a month ago, but I think the recovery has legs,” she tells SmartMoney.

Zerhusen takes a long-term approach, and invests in a focused portfolio of 35 to 40 firms, SmartMoney reports. She keys on stocks with market caps of $1 billion to $12 billion, which she says are “largely ignored”.

Continue reading ‘Top Fund Manager Sees Hopeful Signs’

Biggs: Now Isn’t Time to Be Underinvested

Barton Biggs says the odds of a double-dip recession are “pretty remote”, and says he doesn’t think now is a time to be underinvested. The hedge fund guru tells Bloomberg that he puts the odds of a double-dip somewhere around 1-in-5. He’s nervous about some economic factors, but likes the bearish sentiment in the market, and says large-cap high-quality stocks are very cheap. He also talks about some areas of the market he’s high on, including emerging markets.

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