Insights from Barron's Midyear Roundtable

I always read the Barron's Roundtable discussions with interest; the midyear version, which came out last week, was no exception. Regardless of your opinion of Barron's, the Roundtable brings together a good cross-section of experienced and respected investors -- thus presenting ideas from multiple unique perspectives while also providing indicators of the general tone of "expert" opinion.

The opinions of these experts normally range across a fairly broad spectrum -- from the perennial perma-bull, Abby Joseph Cohen, to the "gloom and doom" Marc Faber. (Of those two, I must confess that my views tend toward the latter -- you have to like someone who features The Dance of Death on his investment advisory website!) I normally do not jump at their advice, but I do use it as a starting point for further investigation -- it represents informed and well-researched opinion and is certainly worthy of consideration.

For this Midyear Roundtable, the various panelists were fairly lukewarm (perhaps "cool" may even be a better word) on the prospects for the economy. Abby Joseph Cohen, not surprisingly, and Meryl Witmer were the most upbeat, with Cohen forecasting the S&P 500 at 1500 by year-end (I thought she was getting out of that business?). Marc Faber, Art Samberg, Fred Hickey, and Felix Zulauf came across as the most pessimistic. The general consensus seemed to be continued difficulties, very low economic growth (but possibly avoiding a recession), and a difficult, mostly flat or slightly down, market (though not without significant volatility). Overall, the tone was not surprising and probably represents a good summary of expert opinion.

Out of curiosity, I conducted a very informal survey of the panelists' stock preferences to get a feel toward which of the various sectors they were leaning. Combining their broad market statements and their specific stock picks, financials and industrials came up as the panelists' favorite sectors.

Financial picks mostly represented plays on a rebound of beaten-down bank stocks, to include Japanese banks. Industrials, which include the transports (as I am using the GICS), covered a broader range of themes -- potential take-over plays, bets on airline shares to appreciate from declining oil prices (in the near-term), and companies benefiting from strong exports. Other sectors with positive attention or specific stock picks from at least three of the panelists were energy, materials, technology, and telecommunications.

On the other hand, financials also qualified as the sector with the most negative views, followed by the consumer discretionary sector. (Cohen was the only one of the panelists with a long pick in the latter.) Given the neutral to negative economic and market forecasts of many of the panelists, this was perhaps to be expected -- many just did not see any good news on the horizon that would provide positive stimulus for stocks in these particular sectors. Technology stocks took third place in the negative category. This time around, utilities received no attention whatsoever.

This was certainly not a very scientific sampling, but does present some interesting perspectives. The Roundtable consensus points to continuing investment challenges this year in an environment full of cross-currents and prone to volatility. This may seem obvious, but there are many out there proclaiming the possibilities of a strong recovery, while others proclaim imminent disaster. I will side with the majority of the Barron's panelists on this one. Of course, this presents both opportunity and risk and brings to mind the hackneyed phrase -- "a stock picker's market." Perhaps over-used, the phrase is appropriate -- though it would be nice if the picking was easier!

For my own investments, I will stick with stocks that provide growth at a reasonable price and while participating in the major themes associated with global growth in demand and infrastructure -- thus focusing my investments in the materials, energy, and industrial sectors (though at the present time and level of valuation I am not looking to add to existing positions), while carefully and unhurriedly selecting a few financials for the eventual turn-around.

Comments

[Bear Stocks Report]

Instead of following these "experts" I would prefer creating a hedged portfolio of longs & shorts. For now REXX, MEE, LNN, AGU and CLR look good on the long side while NCMI, TMX, ARGN, AXL and PACW are ripe for short-selling.