Yale economist Robert Shiller, who predicted the recent housing bust as well as the Internet bust earlier this decade, says that a meaningful recovery seems to have occurred in the housing market — but that we shouldn’t expect it to continue at the current rate.
“It looks like a major turnaround,” Shiller, whose S&P Case-Shiller housing index has now risen for three straight months, told The Wall Street Journal. “We have some concern that it could be an aberration and temporary. But, at this point, it seems to be evident in just about every city in the U.S. That suggests it’s real. But it probably isn’t the beginning of a major boom, just because the economy is in such bad shape. … The most likely scenario is that it won’t continue at this high rate of increase, but that it will neither go down a lot, nor up a lot.”
Each week, I take a look at which stocks my 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 that my strategies have upgraded or downgraded today. Among the big-name movers: CVS Caremark and Honeywell International.
Tom Gardner, co-founder and CEO of The Motley Fool, says in an interview with Forbes that two of the most important things an investor can do are being open to learning from other successful investors, and taking a long-term view of the stock market.
Gardner, who founded The Motley Fool online community with his brother David, was bullish earlier this year when many were pushing apocalyptic viewpoints; since then, the market has surged. “It’s tough to do, and it was,” he said of staying disciplined. “It’s sad to see your portfolio go down, but you really have to train yourself to look at it in 10-year cycles. And I think, obviously, this has not been a great last 10 years. But, all in all, when the market is down, that’s the time to get excited. And when the P/E and all the multiples on earnings across the market are north of 20, that’s a time to get concerned.”
Gardner also discusses why he’s a big believer in fundamental analysis, why he thinks it’s critical to invest in companies with good management (and how he assesses that), and what he might do to change Wall Street — an entity of which he’s been very critical over the years.
Wells Capital Management Chief Investment Strategist James Paulsen is sounding optimistic on the economy, and today explained to Bloomberg TV the reasons for his belief that the solid growth is on the way.
Paulsen says that stimulus plans generally come with a significant lag time (as much as a year), and, because of that, much of the government’s massive stimulus has yet to hit Main Street. He also says that many pundits are underestimating the resilience of the U.S. consumer.
One of the many impacts of last year’s market meltdown was the huge shakeup to stocks’ style box classifications. With most stocks losing a quarter to half of their value — and some of the largest companies being decimated — definitions for “large-cap”, “mid-cap”, and “small-cap” were turned on their heads. And, writes Investment News’ Jeff Benjamin, that appears to have given smaller money managers and individual investors an advantage over big investment firms.
Benjamin says the market plunge “had a unique impact on managers of small-cap stocks because it pushed those stocks that are generally expected to lead a market recovery beyond the range of some big fund managers. … Although smaller-company stocks have led the way in performance since the March 9 stock market low, many of those stocks are only now moving into a market capitalization range that meets the size and liquidity requirements of most large institutional money managers.”
While some managers have revised their definitions for large-, mid-, and small-cap stocks in response to the shakeup, others have not. With that in mind, I thought it would be a good time to see which small stocks my Validea.com Guru Strategies are highest on right now. The nine stocks below all have market caps below $700 million, and all get approval from two of my guru-based approaches.
Stocks with Multi-Guru-Strategy Approval, Market Caps<$700m
Tom Forester, whose Forester Value Fund was the lone diversified stock fund to make money in 2008, is taking profits on some of his 2009 winners, but thinks third-quarter earnings season should be pretty solid because of the government’s massive stimulus efforts.
According to Investment News, Forester — whose fund is lagging the S&P this year (it’s up 11.65% vs. 18.52% for the index) — is cautiously optimistic heading into the fourth quarter. “Right now I’m feeling that the market is getting a little top-heavy, and I have already taken some beta out from some of the industrial names,” he said.
Mark Mobius, manager of Templeton Emerging Markets Investment Trust says that emerging markets have a lot of room left to run, and that “frontier markets” — those in the very early stages of developing, like Vietnam, Romania, and Kenya — are “where it’s at”.
Mobius tells the U.K.’s Telegraph TV that a big reason for his optimism is that money supply is “growing at a rapid pace globally and there’s a lot of money coming in to be invested.” Mobius also warns that investors should take a five-year plan, and stay away from trying to time the market.
In an interview with MarketWatch’s Chuck Jaffe, Blackrock Global Chief Investment Officer of Equities Bob Doll gives his take on what to expect from the economy and the markets as we move past the financial crisis and recession. The “new normal” Doll envisions isn’t as bleak as some have described, but it’s also not euphoric. He thinks it may look something like what we saw in the early 1990s, before the Internet and credit bubbles grew out of control. That means sustainable growth of 2.5% to 3% in real GDP, profits generally moving upward, markets moving up more often than they move down, periodic recessions — and a consumer that contributes to growth, though perhaps not quite as much as they have in recent years.
Doll also says he doesn’t think we’ll have a “double-dip”, or “W” recession. But he does think that growth will likely be slower in 2010 than it will be in the second half of 2009. Doll says a diversified portfolio should be key in the new normal, and offers several picks in the energy, healthcare, and technology sectors. And, he highlights a few potential problems that could derail the recovery.
Each week, I take a look at which stocks my 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 that my strategies have upgraded or downgraded today. Among the big-name movers: Google and United Technologies.
Marc Faber of the Gloom, Boom & Doom Report says that the U.S. is headed for major trouble in the long term because of the impending implosion of the dollar — but in the short term, he’s buying stocks, reports Yahoo! TechTicker.
Faber, one of the few to see the credit crash coming, says that with interest rates so low, investors should be buying up assets like stocks, commodities, and real estate in the next two or three years. As the dollar plunges, he says cash and U.S. government bonds will become “worthless”. In terms of stocks, he likes gold mining companies and oil and natural gas firms. He also mentions some U.S. healthcare sector picks, though he says that he’s generally higher on overseas equities than U.S.stocks. (Thanks to me98321 for posting this clip.)
In another segment of the interview, Faber says that Kenneth Fisher’s recent claim that the U.S. is under-indebted — which we highlighted here — is wrong. Click here to see that portion of the interview.