Muhlenkamp High on Healthcare, Tech Stocks

Ron Muhlenkamp, whose fund has bounced back strong this year after a rough stretch and has now beaten 90% of funds in its class in the past decade, is high on high-quality technology and healthcare stocks.

According to Kiplinger’s, Muhlenkamp is high on tech firms like Hewlett-Packard and Cisco. He’s also made a bundle on IBM in recent months, and is now scaling back on that position, Kiplinger’s says.

In the healthcare sector, Muhlenkamp likes Pfizer and UnitedHealth Group. Despite fears of government intervention in the sector, Muhlenkamp says that the firms are key parts of the healthcare industry, and good buys, according to Kiplinger’s. “The last time you had the chance to buy drug companies this cheap was during HillaryCare” in the early 1990s, he said.

When More Stocks Doesn’t Equal More Diversification

Diversification is a topic we often discuss on this blog, and in the video below Jason Zweig of The Wall Street Journal offers some very interesting thoughts on the topic. According to Zweig, many studies have shown that holding 20 to 30 stocks can diversify away much of the risk you’d get by picking just one stock. But, he notes, the problem is that those studies are based on computers randomly generating portfolios — not human beings assembling their portfolios. And, he says, humans “are terrible at doing things that have a quality of randomness”, which can sometimes lead them to create larger portfolios that are actually riskier than those that hold just a few stocks.

Siegel Sees 4%-5% Growth Ahead

Wharton Professor and author Jeremy Siegel says he thinks the U.S. economic recovery will surprise to the upside, with 3.5% GDP growth in the fourth quarter and 4% to 5% growth in the first half of 2010.

Siegel tells Bloomberg that he believes that by December or January the U.S. will see its first positive payroll reading. “Once that turns positive, I think that’s going to remove an element of fear” that has plagued Americans, he says, triggering spending and growth.

Bolton Eyes China

Fidelity’s Anthony Bolton, one of the U.K.’s most successful fund managers before retiring in early 2008, is putting retirement on hold as he tries to take advantage of what he says is the “opportunity of a generation” in China.

Bolton is starting a new fund focused on companies exposed to Chinese consumer growth, The Wall Street Journal reports. “He points to studies that show consumers in emerging economies launch into a new phase of purchasing when per-capita gross domestic product hits $4,000 to $5,000,” a level China is expected to hit in 2011, the Journal reports.

“As average incomes pass this key threshold,” Bolton says, “you get a big growth in the group that can afford to make the purchases of cars, apartments, etc., and that is where China is today. He also said that China’s government gives it an advantage over more democratic countries. “It’s happening with a centrally run economy at the same time where things get done where often in other economies they get bogged down in politics,” he said.

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Mobius: Be Ready for Emerging Market Correction

Templeton Asset Management’s Mark Mobius says investors should be ready for a 20% correction in emerging market stocks, triggered by Dubai’s attempt to delay its debt payments and compounded by the devaluation of the Vietnamese currency.

“This may be the trigger to allow for the market to take a rest and pull back,” Mobius told Bloomberg. “A 20 percent correction is not unusual in such a bull market, so that’s quite possible and we should be ready for that. There’s no way that anyone can specifically predict exactly when and to what extent, but certainly there will be corrections along the way.”

Mobius said he remains bullish on Vietnam, but added that “over the short and medium term we have to look very carefully at what’s happening.”

Fisher Still Bullish, Focused on Materials Stocks

Kenneth Fisher thinks that a strong internal demand for materials and commodities in emerging market countries is part of what will continue to drive materials stocks higher. Fisher also tells Bloomberg that areas that do okay in the first part of bear markets but badly on the back half of bears — like materials in the recent bear — tend to lead in the first part of the next bull market.

 

Ritholtz on the Economy/Market Disconnect

Barry Ritholtz of The Big Picture blog and Fusion IQ says that, while the economic recovery is anemic, a number of other factors are making stocks continue to look attractive.

Ritholtz, who called both the market crash and the recovery, tells Yahoo! TechTicker that as long as the economy remains weak, the Federal Reserve will likely keep interest rates at historically low levels, which is a bullish sign for stocks. Those low rates and the government stimulus efforts — not profits — are what is driving the market, making it so “cash is trash”, he says. Disconnects between the economy and the stock market like the one we’re seeing can go on for years, he adds.

Guru Strategy Rating Changes: Foreign Firms on the Move

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. As you can see, a number of foreign stocks are on the move.



Biggs Sees Market Moving Higher

Hedge fund guru Barton Biggs tells Charlie Rose that he expects the next major move in the market will be to the upside, and says he thinks the U.S. would be wise to add more stimulus into its recovering economy.

Biggs says he’s looking for the market’s next big move to be a 10% to 15% rise. He does see the U.S. having slower growth in coming years, because of the lingering effects of the housing bust. He says European economies in better shape than the U.S., and he’s particularly high on Asian markets, from China to India to smaller developing nations.

Among Biggs’ other key points:

  • He’s not concerned with the ballooning federal deficit;
  • He thinks China is not in a bubble state, and that domestic Chinese demand will make up for slower exports;
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How to Beat the Market with Graham, Buffett, Lynch, and the Gurus

In a wide-ranging interview with The Kirk Report, Validea founder and CEO John Reese explains how he developed his guru-based investment strategy, why it has been so successful, and what individual investors can do to beat the market.

Among the many topics the interview covers:

  • How Reese was able to take the published strategies of investment greats like Peter Lynch, Benjamin Graham, Warren Buffett, and several others and turn them into computerized stock-screening tools that individual investors can access;
  • Where so many investors — professional and amateur — go wrong in trying to beat the market over the long haul;
  • How approaches like Reese’s Benjamin Graham and Hot List portfolios have averaged returns of 14% to 15% per year since they were created in 2003, while the broader market has struggled to stay in the black;
  • Which key stock-selection variables tend to be most popular among gurus like Lynch, Graham, Buffett, and others;
  • How using multiple Guru Strategies to guide your portfolio can reduce risk and maximize returns.