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05-09-2014, 10:50 PM
An honorable member of the Coffee Shop Has Just Posted the Following:
If there is one common element to the current batch of investing strategies from Wall Street, it’s this: caution. That’s why David Kostin stands out. Sure, the chief U.S. equity strategist at Goldman Sachs has some of the lowest expectations on Wall Street for U.S. stocks, but his strategy for navigating through a low-return environment is remarkably bold.
Mr. Kostin expects the S&P 500 will rise to 2,050 by the end of the year, for a gain of just 2 per cent from current levels, as the improving U.S. economy collides with record-high stock prices and steep valuations.
His target makes stocks look unattractive, especially when compared with an impressive rally of nearly 22 per cent over the past 12 months.
But he believes that investors can improve their gains by positioning themselves for a year-end shift by professional hedge fund and mutual fund managers, as they try to make up for dismal performance so far this year.
While the S&P 500 has risen about 8 per cent in 2014, the average return for hedge funds is a mere 2 per cent, according to Hedge Fund Research Inc.
As for large-cap mutual fund managers, just 23 per cent are outperforming the S&P 500 – well below the average of 37 per cent and close to the lowest level of outperformance over the past decade.
“As they return from the beach or sightseeing and get back to work, nearly 80 per cent of large-cap mutual fund managers will be forced to re-evaluate their portfolios or embrace the likelihood of drafting very disappointing year-end letters,” Mr. Kostin said in a note.
Mr. Kostin thinks the pros will choose to re-evaluate their portfolios, and that means they will attempt to boost their returns in the fourth quarter to give their full-year performance a better appearance.
How? Mr. Kostin outlines three approaches that have worked over the past 22 years when fund managers have lagged their benchmarks at the end of the third quarter.
One, the pros will snap up the most popular stocks, perhaps adding to positions they already own. If fund managers shied away from sought-after stocks like Netflix Inc., Facebook Inc. and Salesforce.com Inc. earlier in the year, they will likely push aside such inhibitions as 2014 ticks down.
Two, they will chase stocks that have shown the best momentum, in the hope that what worked in the first three quarters will continue to shine. Actavis PLC has risen 36 per cent so far this year, Delta Air Lines Inc. has risen 50 per cent and Williams Cos. Inc. has surged 57 per cent.
And three, they will look for so-called high beta stocks – or stocks that tend to be more volatile than the S&P 500 – under the belief that the greater risk will bring bigger rewards. These stocks include Cummins Inc., Halliburton Co. and MetLife Inc.
Mr. Kostin assembled a list of 15 stocks (including the nine mentioned above) that combine all three approaches and come with one added feature: They are all rated “buy” by Goldman Sachs analysts.
The other six: EOG Resources Inc., Monsanto Co., Comcast Corp., MasterCard Inc., American Tower Corp. and McKesson Corp.
Together, these stocks have some fine qualities. Their expected earnings growth is about double what the S&P 500 is supposed to deliver. As well, analysts’ 12-month target prices imply gains of 17 per cent on average.
Of course, the list can also make investors squeamish, especially if they are already feeling a tad nervous about stocks after the S&P 500 tripled from its lows in 2009.
For example, you might pause over the fact that the average gain this year for the 15 stocks in the Goldman Sachs list is nearly three times the gain for the S&P 500. The stocks are also pricey: The average price-to-earnings ratio is 18.2, using estimated earnings – significantly higher than the 16.9 average P/E for the index, which itself is high.
The point isn’t that these stocks are a steal, but rather that fund managers are going to be desperate for a portfolio makeover – and these are the stocks they’ll be looking for. The trick is to buy them before the year-end rush
Click here to view the whole thread at www.sammyboy.com (http://www.singsupplies.com/showthread.php?189495-Investment-Strategy-for-Q4&goto=newpost).
If there is one common element to the current batch of investing strategies from Wall Street, it’s this: caution. That’s why David Kostin stands out. Sure, the chief U.S. equity strategist at Goldman Sachs has some of the lowest expectations on Wall Street for U.S. stocks, but his strategy for navigating through a low-return environment is remarkably bold.
Mr. Kostin expects the S&P 500 will rise to 2,050 by the end of the year, for a gain of just 2 per cent from current levels, as the improving U.S. economy collides with record-high stock prices and steep valuations.
His target makes stocks look unattractive, especially when compared with an impressive rally of nearly 22 per cent over the past 12 months.
But he believes that investors can improve their gains by positioning themselves for a year-end shift by professional hedge fund and mutual fund managers, as they try to make up for dismal performance so far this year.
While the S&P 500 has risen about 8 per cent in 2014, the average return for hedge funds is a mere 2 per cent, according to Hedge Fund Research Inc.
As for large-cap mutual fund managers, just 23 per cent are outperforming the S&P 500 – well below the average of 37 per cent and close to the lowest level of outperformance over the past decade.
“As they return from the beach or sightseeing and get back to work, nearly 80 per cent of large-cap mutual fund managers will be forced to re-evaluate their portfolios or embrace the likelihood of drafting very disappointing year-end letters,” Mr. Kostin said in a note.
Mr. Kostin thinks the pros will choose to re-evaluate their portfolios, and that means they will attempt to boost their returns in the fourth quarter to give their full-year performance a better appearance.
How? Mr. Kostin outlines three approaches that have worked over the past 22 years when fund managers have lagged their benchmarks at the end of the third quarter.
One, the pros will snap up the most popular stocks, perhaps adding to positions they already own. If fund managers shied away from sought-after stocks like Netflix Inc., Facebook Inc. and Salesforce.com Inc. earlier in the year, they will likely push aside such inhibitions as 2014 ticks down.
Two, they will chase stocks that have shown the best momentum, in the hope that what worked in the first three quarters will continue to shine. Actavis PLC has risen 36 per cent so far this year, Delta Air Lines Inc. has risen 50 per cent and Williams Cos. Inc. has surged 57 per cent.
And three, they will look for so-called high beta stocks – or stocks that tend to be more volatile than the S&P 500 – under the belief that the greater risk will bring bigger rewards. These stocks include Cummins Inc., Halliburton Co. and MetLife Inc.
Mr. Kostin assembled a list of 15 stocks (including the nine mentioned above) that combine all three approaches and come with one added feature: They are all rated “buy” by Goldman Sachs analysts.
The other six: EOG Resources Inc., Monsanto Co., Comcast Corp., MasterCard Inc., American Tower Corp. and McKesson Corp.
Together, these stocks have some fine qualities. Their expected earnings growth is about double what the S&P 500 is supposed to deliver. As well, analysts’ 12-month target prices imply gains of 17 per cent on average.
Of course, the list can also make investors squeamish, especially if they are already feeling a tad nervous about stocks after the S&P 500 tripled from its lows in 2009.
For example, you might pause over the fact that the average gain this year for the 15 stocks in the Goldman Sachs list is nearly three times the gain for the S&P 500. The stocks are also pricey: The average price-to-earnings ratio is 18.2, using estimated earnings – significantly higher than the 16.9 average P/E for the index, which itself is high.
The point isn’t that these stocks are a steal, but rather that fund managers are going to be desperate for a portfolio makeover – and these are the stocks they’ll be looking for. The trick is to buy them before the year-end rush
Click here to view the whole thread at www.sammyboy.com (http://www.singsupplies.com/showthread.php?189495-Investment-Strategy-for-Q4&goto=newpost).