Are double-dip fears fueling bullishness?

The slowing of the recovery has led many folks to flee the market. But a top investor says the fear is helping certain stocks.

By John Reese Aug 13, 2010 2:44PM

With the economic recovery slowing a bit and fears of a double-dip recession growing, many investors have been fleeing stocks in recent days. But could the double-dip fears actually help stocks?

For emerging markets, the answer is yes, says Mark Mobius, the executive chairman of Templeton Emerging Markets Group. Mobius told CNBC this week that the double-dip fears -- and the Federal Reserve's decision to reinvest mortgage-backed security funds into Treasuries -- are bullish signs for emerging markets.  "The fear has been a very good thing," he said, "because it means that the Fed, European Central Bank, all these banks around the world, are afraid of a recession, and therefore will continue to supply money to the markets and liquidity."

 

Mobius also says he's increasing his exposure to riskier markets like Thailand, Pakistan, and Russia, which offer higher potential returns than other more developed markets.

 

Other gurus I keep an eye on are finding opportunities at home, however.

 

Top fund manager Bill Nygren, for example, tells Morningstar that all of the focus on macroeconomic factors has created "micro" opportunities for long-term investors. “I still believe that as most investors focus on the macro it creates more micro opportunities,” Nygren says. “That’s a plus for bottom-up, fundamental investors. … [And] with the majority focused on momentum instead of value, more stocks are selling at either abnormally large discounts or premiums to long-term value.” Nygren says the market is "very attractive" today.

 

Another top fund manager, Chuck Akre, doesn't seem to be finding as many opportunities. “I’m particularly cautious,” Akre tells CBS MoneyWatch. “Consumers are dramatically under-employed. They’re afraid about losing their jobs if they have them, they’re afraid they won’t get a job if they don’t. … We won’t have the discretionary dollars to spend that we did in the last decade.” Akre is finding some attractive stocks, however, and MoneyWatch examines some of his top picks, including American Tower (AMT).

 

Sounding more optimistic is Wells Capital Management's Jim Paulsen. Paulsen told Bloomberg this week that U.S. stocks look very cheap compared to fixed income investments. In fact, he says valuations show that from a longer-term view, "it's screaming that … stocks are the place to be relative to bonds".  He says he finds material, industrial, technology, and consumer stocks particularly interesting.

 

Finally, Blackrock's Bob Doll and CGM's Ken Heebner said in a joint CNBC interview that they are seeing opportunities in various parts of the market. Doll said equities look attractive, and that valuations are "pretty cheap". He likes Intel (INTC) and Raytheon (RTN). Heebner likes Ford (F), and says the automobile industry is a "major source of opportunity".

 

Disclosure: I'm long RTN.

 

John Reese is founder and CEO of Validea.com, a premium investment research site, and Validea Capital Management, a separate account advisory firm. He is author of the new investing book, "The Guru Investor: How to Beat the Market Using History's Best Investment Strategies".

 

 

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