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Saturday, January 1, 2011

Investment tips for 2011- Top stocks or other investments

Investment tips for 2011- Top stocks or other investments ; The economy, while showing some signs of recovery, remains shaky. The jobless rate is still high as corporations put off hiring. Governments are strapped and will likely make tough cuts in 2011. Despite the grim reality, stocks finished 2010 on a strong rally. Many investors expect big things again this year as recovery takes hold.

To provide an outlook for individual investors, we consulted some pros. These experts in Charlotte and the Triangle help manage billions of dollars and earn good money to make smart bets.

We asked them each a series of questions - including the smartest financial move they recommend for 2011, what advice they give people who approach them at cocktail parties, and the best financial advice they received from a trusted mentor.

Naturally, if any of the following advice were foolproof, they wouldn't give it away. As always, do your own research, stay diversified and assess your own willingness for risk.

Kendrick Mattox
CFA at Carolinas Investment Consulting in Charlotte.

Smartest money move: I recommend that investors seek active managers who employ flexible mandates, can ratchet the risk levels up and down and have proven to be opportunistic and tactical in the past. Without clairvoyance on the market's behavior in 2011 and beyond, increasing one's allocation to highly flexible managers should be beneficial from both a risk and a return standpoint.

Outlook for stocks: We believe the broad equity markets (as defined by both the S&P 500 and MSCI World) still have room to run, maybe even upwards of 10 to 15 percent.

Top stocks or other investments:

High-quality, clean balance sheet, dividend-paying, multinational stocks. For those who feel they need tax-free dedicated income, transition into actively managed municipal bond managers.

Asset Rotation or Global Tactical Asset Allocation (GTAA) mutual funds. These funds rotate between stocks, bonds, cash and other asset classes (such as REITs, commodities and emerging markets) and have proven that their nimbleness can be rewarding. In uncertain times, investors need a manager who tactically can rebalance their portfolio without being emotional or reactionary.

Red flags: Blindly sitting in a municipal bond without conducting detailed credit analysis on such.

Key indicators: Corporate revenues, both bottom and top line. If public companies can continue to grow the revenues that support their cash flows and dividends, then investors should continue to have a reason to own them.

Advice for nervous clients: Design a solid, well thought-out investment game plan that is rooted in diversification and stick with it. History tells us that most retail investors buy and sell at the wrong time.

Party advice: Hire an adviser who can help you design and maintain an investment game plan that is tailored to your unique circumstances and preferences.

Best advice from a mentor: Be patient and unemotional.

Don Olmstead

Managing director of Novare Capital Management in Charlotte.

Smartest money move: We recommend individuals remain invested in equities (according to their asset allocation) and sell long-term bonds and long-term bond funds. Our investment committee believes that interest rates will rise and long-term bonds and funds will lose value.

Outlook for stocks: We predict the S&P 500 will grind higher by 8 to 10 percent.

Top stocks or other investments: We believe the top three equity sectors will be technology, industrials, and oil and gas pipelines (MLPs). Technology is benefiting from a corporate refresh on software and equipment, mobile technology, and the beginning of cloud computing. Our top picks in this space are Global Payments Inc., Qualcomm Inc., and Intuit Inc.

Oil and gas pipelines have been one of our favorite sectors for many years because of the higher yields or distributions, lower commodity risks, and the continuing demand for energy and pipelines. Our favorite names are Enterprise Products Partners and Plains All American Pipeline.

The industrial sector is benefiting from strong exports due to the weaker dollar and stronger spending on capital equipment. Our top selections in industrials are Ingersoll Rand, Fluor Corp. and Honeywell International Inc.

Red flags: We are concerned by the number of people unemployed and underemployed, which has a direct impact on consumer confidence and spending. We are keeping a close eye on the European debt crisis and its potential impact on global and U.S. growth. We continue to have concerns with the U.S. government's debt levels.

Key indicators: We recommend watching the monthly unemployment number, consumer confidence and interest rates, specifically the 10-year Treasury rate.

Party advice: Don't listen to stock tips at parties. Be an original thinker who does not follow the herd.

Best advice from a mentor: Keep your debt levels low, live within your means, work with trusted advisers and enjoy the journey!

Mark Yusko

CEO and chief investment officer of Morgan Creek Capital Management in Chapel Hill.

Smartest money move: Get as diversified as possible across geographies, sectors, assets and currencies.

Outlook for stocks: The S&P 500 will decline 10 percent for the year, probably increasing through the summer and then decreasing in the fall and winter.

Top stocks or other investments:

Gold: GLD, GDX, after a tough first quarter.
Energy and energy services: OIH, XLE, after a volatile first quarter.
KKR & Co. as a play on private equity.

Red flags: Rising commodity prices, slowing GDP growth, ballooning government budget deficits.

Key indicators: The unemployment rate. You can't have solid growth without creating real jobs.

Advice for nervous clients: If you only buy assets (stocks, bonds, houses, etc.) at appropriate prices (less than the fair market value), you should actually be excited when prices fall, as you get to buy more of a great asset at an even better price. If you feel panic when markets fall, you are in the wrong assets. Sell them immediately and buy something that you understand and that you believe is priced below fair value, something that is "on sale."

Investing is the only business I know that when things go on sale, people run out of the store. If you wait to "get even," you will wait a very long time and lose a lot more money.

Party advice: Never buy anything that anyone tells you about at a cocktail party.

Best advice from a mentor: Be an investor, not a trader. Buy good assets at good prices. There is no investment "good enough" that you can't mess up by paying too much.

Eric Teal

First Citizens Bank Capital Management Group in Raleigh.

Smartest money move: Focus on boring U.S. quality companies that have solid balance sheets.

Outlook for stocks: Historically, the third year of the four-year presidential cycle produces the highest market returns. However, much of the gains have been pulled forward during the second half of 2010. The S&P 500 is pretty fairly valued, and we expect a total return of about 5 percent. During the first half of the year, we anticipate the economic recovery and positive momentum to grind the market higher, followed by more worries about inflation and interest rates that will result in a lackluster second half.

Top stocks or other investments: Stronger GDP growth, higher commodity exposure and improving balance of payments should result in emerging markets' continued outperformance and premium to the S&P 500. Despite problems in the financial system, there are a growing number of indicators that conditions are improving and the credit cycle is turning, a positive sign for banks.

Red flags: A key concern is the prospect of housing not recovering and breaking to new lows. Inflation concerns in China and the emerging economies (could) result in tighter monetary conditions and a "hard landing" for the Chinese economy. Key indicators: Jobs, jobs, jobs. The economy and confidence will remain very fragile without sustainable job creation.

Advice for nervous clients: Emotions typically compound investment mistakes. If you still believe in your initial investment, then a lower price only makes it a more attractive buying opportunity. However, do not be reluctant to cut your loss as quickly as possible if circumstances have changed.

Best advice from a mentor: From the works of one of the world's foremost economists, John Maynard Keynes, who once said to investors: "Markets can remain irrational far longer than you or I can remain solvent."

Maceo Sloan

Head of NCM Capital in Durham.

Smartest money move: Cash is not where you want to be. We expect short-term interest rates to remain low for the year, providing very little return.

Outlook for stocks: The S&P 500 will rise about 12 percent.

Top stocks or other investments:

Cree Inc. is levered to the adoption and growth of LED-based lighting in commercial and industrial applications. Unlike the consumer electronics market, there are only three or four companies in the world that can make LEDs for general lighting. We believe the company has the potential to increase earnings in excess of 25 percent annually for the next several years.

Gilead Sciences Inc. makes HIV drugs and has a best-in-class franchise in a market with high competitive hurdles.

Citigroup Inc. has more exposure to faster-growing emerging markets than its peers and less exposure to regulatory issues in the U.S.

Red flags: Inflation creeping up; state and local budget issues.

Key indicators: Employment growth and corresponding improvement in consumer spending. Corporations have cut costs, which has helped reported earnings, but there's probably little left to cut.

Advice for nervous clients: Don't try to time the market. Make investing a regular part of any savings and investment plan, both in good markets and bad.

Party advice: Invest only in companies that manufacture products or provide services that you understand and/or use.

Best advice from a mentor: Your credit rating starts at birth. Protect it zealously.

Janet Fox

President of ACH Investment Group in Raleigh.

Smartest money move: Invest in the stock markets gradually through "dollar-cost averaging." This involves continuous investment in securities regardless of the price fluctuations.

Outlook for stocks: Overall, the markets could see positive results, but there will be volatility. We expect single-digit returns.

Top stocks or other investments: Energy or utilities and industrials are good areas with high-quality, dividend-paying stocks. We also like multinational companies with good global growth potential such as Chevron Corp., Coca-Cola Co., Caterpillar Inc. or 3M Co.

Red flags: Rising interest rates and inflation.

Party advice: Statistics typically illustrate that the turtle wins the race. Investing for the long term is more beneficial.

Best advice from a mentor: It is never too late for someone to start planning and investing. Your return is determined more on the purchase price than the selling price.

Judson Gee

JHG Financial Advisors/LPL Financial in Charlotte.

Outlook for stocks: The S&P 500 will have high single digit to very low double digit returns, 8 to 11 percent.

Top stocks or other investments:

Commodities linked to materials, energy, industrials and precious metals benefit from the Federal Reserve's quantitative easing (QE2) reflationary measures.

Emerging market equities and debt.

Higher yielding securities such as junk bonds and preferred stocks.

Red flags: Inflation, rising interest rate environment (second half), employment and spending.

Advice for nervous clients: Revisit goals, with an emphasis on time horizons and the level of risk versus reward. Recap your reasoning behind strategies to confirm if they are still valid.

Party advice: Be prepared for more volatility and incorporate tactical and alternative asset strategies while complementing long-term traditional strategic asset allocation.

Best advice from a mentor: Bear markets and recessions are like tear-jerker movies you've seen before: Halfway through you realize you know the outcome (it will pass and a better world will emerge again), but you cry every time just the same.

John Gugle

CEO and chief investment officer of Alpha Financial Advisors in Charlotte.

Smartest money move: Avoid or reduce exposure to bonds. Interest rates will rise despite any efforts of the Federal Reserve to keep rates low. As interest rates go up, bond prices will come down. I prefer stocks that reflect the superior balance sheets in corporations as compared to the debt of the federal or state government. At this point in the economic cycle, stocks offer a better risk/reward trade-off than bonds.

Outlook for stocks: The S&P 500 index will increase 13 percent in 2011. International stock indices will outperform the U.S.

Top stocks or other investments: Lazard Emerging Markets Equity, Ivy Science & Technology and Harbor International. International stocks, especially those in emerging markets, should outperform domestic stocks. Economies outside the U.S. have better growth rates and do not face the same economic headwinds (i.e., housing and unemployment) that we face. Technology is poised for a breakout year as businesses look to expand on productivity gains to fuel growth.

Red flags: Watch for what happens in Europe. Countries with severe debt problems like Ireland, Greece, Spain and Portugal will start to implement austerity measures. Those pressures could move to the U.S. Watch closely how California deals with its massive debt overhang -- it's an early indicator of possible troubles.

Key indicators: Watch the 10- and 30-year bond yields. They can signal if the Fed is abandoning quantitative easing and/or if creditors are demanding higher rates of interest to compensate for lower U.S. creditworthiness.

Advice for nervous client s: From Warren Buffett: "Be greedy when others are fearful, and be fearful when others are greedy." If your time horizon is long, see market drops as opportunities to buy investments on sale.

Party advice: To be a financial success, all aspects of your finances must be in optimal working order. Address insurance, estate planning, retirement planning, taxes and investments in a coordinated manner. One good investment choice will not make you a success if you've ignored the other vital parts of your finances. For the latest updates PRESS CTR + D or visit Stock Market news Today

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