Nygren, Fisher see opportunities amid pullback

Despite the market's bearish turn, most of the successful investment gurus I keep an eye on aren't turning away from equities.

By John Reese Feb 5, 2010 4:59PM

The markets continue to get rattled by a number of factors, ranging from China's recent economy-cooling measures to Europe's troubling debt picture to stubbornly high unemployment numbers in the U.S. But with sentiment dropping -- the American Association of Individual Investors' weekly survey found that less than 30% of investors are now bullish, down from 47% in mid-January -- there are plenty of opportunities to pick up solid stocks.

That's what several of the gurus I keep an eye on indicated over the past week. Most are still bullish, including top value manager Bill Nygren. Nygren, whose Oakmark fund is up more than 50% over the past year and is in the top 2% of funds in its category over the past decade, said now is not the time to fear stocks. “The thoughtful investor today, rather than thinking about how they missed the rally or remaining afraid of another lost decade, needs to get back to basics," he told Minyanville.com. “They need to think about what target equity allocation makes sense for them."

 

For most, Nygren said, "equities are still the asset class of choice. They should still have long-term returns exceeding fixed-income returns. Most investors today are still beneath their target allocations.”

 

Nygren says he's currently high on the consumer discretionary sector, citing several media companies he says are selling on the cheap. He also likes a number of retailers.

 

Another guru sounding bullish is Kenneth Fisher, whose book Super Stocks forms the basis for one of my most successful Guru Strategies. Fisher told Forbes.com that we are still in the early stages of a bull market that will be led by foreign and emerging markets. "We’re at a point where it’s the emerging markets world with an emergent, vibrant middle class that’s growing at a fairly rapid rate that’s pulling us along faster than we would otherwise,” he says. “Whenever we’ve had a huge bear market decline and then a positive 12 months, the subsequent 12 months after that have almost always been nicely positive. So my view is that history’s telling us, with the non-U.S. world pulling us along, we’re probably going to have a positive year in 2010.”

 

Of course, there are a number of headwinds confronting stocks and the economy, and some, including PIMCO's Mohamed El-Erian, think they'll be too much to support a strong, swift recovery. El-Erian told Bloomberg this week that he still believes we'll see a "new normal" for the economy. El-Erian says research shows that, while strong bounce-backs are typical in recoveries from crises that are cyclical in nature, they are not typical in recoveries from crises that are structural -- like the current recovery. He expects to see prolonged high unemployment and slower growth for some time.

 

Author and Wharton economist Jeremy Siegel says, however, that the economy isn't what's been bringing the market down lately. Economic data has been solid, he says, and the markets are being rattled by proposed new financial regulations, and a stronger dollar. Siegel expects that while we may see a brief pullback in stocks, the market should still head to new highs in the spring. And, if oil falls below $70, he says that could form the basis for a new leg of the rally.

 

Looking abroad, newsletter guru and money manager Jim Oberweis, whose China-related fund is up more than 100% over the past year, said, meanwhile, that some headwinds could affect Chinese stocks going forward -- namely a continuing global recession and trade disputes between the U.S. and China. But, he told Bloomberg, he doesn't expect a trade war between the two nations, and he said recent fears about the steps China has taken to cool its property market have made Chinese stocks cheaper and more attractive.

 

 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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