Barron's Interviews Templeton's Gary Motyl

Barron's interviews Gary Motyl, Chief Investment Officer of Templeton Global Equity Group, who highlights sectors and regions worth a closer look.

Motyl is upbeat about the chances of a global economic recovery and stock market rebound. Though risks remain, he thinks now is a good time to buy. Some excerpts:

• The long-term outlook for global equities is positive, but volatility will likely remain a feature of the market.
• Despite the recent market bounce, there's still plenty of buying opportunities out there. Valuations are pretty low historically, and "investors can expect an annualized return of 8% or 9% over the next five years in global equities."
• Emerging markets like China, Brazil and Russia have been showing signs of life and are recovering from their bottoms.
• Sectors and themes that are popular with investors include commodities and industrial materials, and in technology, semiconductors. There's also been renewed interest in consumer cyclicals such as retail stocks. Templeton's biggest weightings as of March 31 were: health care (16.28%), financials (15.73%), information technology (13.26%), telecommunications services (11.74%), consumer discretionary (10.22%) and energy (10.16%). The rest was in industrials (9.41%), consumer staples (6.71), materials (3.66%) and utilities (2.84%).
• Telecommunications stocks look attractive and are selling at low multiples of earnings. They tend to have good cash flow and many offer high dividend yields. In particular, Telefonica (TEF) has a good mix of fixed and wireless assets, excellent management and a consistent track record of dividend growth.
• In health care, Novartis (NVS) is undervalued because investors are focused on short-term issues facing the company and industry. However, the company has a number of promising drugs in development and non-pharmaceutical revenues are forecast to increase to 50% of company revenue from 30% in the next five years.
• Cisco (CSCO) is also undervalued. The P/E ratio peaked above 100 in 2000, and is now down to 14 times FY '09 forecasts. Investors are underestimating Cisco's "ability to benefit from secular trends in video conferencing, wireless data and streaming video."
• Templeton's largest media holding is Comcast (CMCSA), which has a strong cash flow and looks undervalued on a number of measures. Investor concerns are receding and dividend yields could grow in the coming years.

(The full interview is available here.)

Comments

[redmuddler:]

All p/e will drop to 4 when the government admists they are not bigger than the world economy and they finally stop wasting our tax dollars propping up this dead man we call our economy. Sure, these stocks may go up for a while but in the end all assets will corollate down. This is simply re-arranging the deck chairs on the Titanic..

Jun 21 11:14 PM

[johnbee:]

If you're right then money will be worthless so you may as well bet what you've got left on an upside and not get left out if you're wrong.


On Jun 21 11:14 PM redmuddler wrote:

> All p/e will drop to 4 when the government admists they are not bigger
> than the world economy and they finally stop wasting our tax dollars
> propping up this dead man we call our economy. Sure, these stocks
> may go up for a while but in the end all assets will corollate down.
> This is simply re-arranging the deck chairs on the Titanic..

Jun 22 09:54 AM