U.S. money managers not giving up on equities

New York Wed Dec 7, 2011 7:18pm EST

Leo Grohowski, chief investment officer of BNY Mellon Wealth Management, speaks at the Reuters Investment Outlook Summit in New York, December 6, 2011.    REUTERS/Brendan McDermid

Leo Grohowski, chief investment officer of BNY Mellon Wealth Management, speaks at the Reuters Investment Outlook Summit in New York, December 6, 2011.

Credit: Reuters/Brendan McDermid

New York (Reuters) - The violent swings in the U.S. stock market have damaged investors' psyches, but money managers at this week's 2012 Reuters Investment Outlook Summit see the environment as a buying opportunity.

The sell-offs this year have produced low price-to-earnings multiples on the stocks of companies with world-class, global franchises and strong balance sheets, investors said.

In fact, U.S. corporations still have record amounts of cash on their balance sheets ($2 trillion), which could lead to shareholder-friendly moves including share buybacks, dividend increases, and merger and acquisitions.

"I think this is going to be a good environment for shareholder value," said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management.

Technology and energy stocks warrant overweighting, said Grohowski, adding that he is "slightly overweight financials."

He predicts the benchmark S&P 500 index will end 2012 at 1,350 points, an 8 percent gain from current levels.

For the most part, money managers like Grohowski think bad news from Europe is already priced into the markets.

"The economy globally is much stronger than people think," said Ken Fisher, chief executive of Fisher Investments, who said he is overweight anything "economically sensitive."

David Joy, chief market strategist of Ameriprise Financial, agreed with Fisher. "I think there's some very good value for equity markets globally," Joy said.

He cited the ability of the United States to emerge relatively unscathed from the "trauma" of the bitter U.S. Congressional debt ceiling/default debate as a sign of strength.

"It was a great unknown at the time, and we survived it. ... What actually happened was people realized the world didn't stop turning, so they started spending again."

Macro worries have been blinding many to corporate growth.

"Corporate earnings are strong and they're not being priced into the marketplace," said Tom Sowanick, chief investment officer of OmniVest.

In Sowanick's view, investors deem any upward move in stocks as dubious and are "always trying to fade the equity rally."

But, he said, the United States, has "been able to segregate U.S. economic activity from European economic activity." Sowanick projects a 2012 year-end S&P performance of 1,365.

Bonds could also be stealing equities' thunder, according to Todd Petzel, chief investment officer of Offit Capital Advisors, who said called equities "undervalued" by comparison.

American investors may have to shed attachments to fast profits in favor of slower, steady growth stories, according to Shawn Kravetz, chief investment officer of Esplanade Capital.

Kravetz targets companies with cheap valuations and low growth expectations, and called Target(TGT.N), Lowe's(LOW.N), and Walmart(WMT.N) "get rich slow" stocks. Others mired in low expectations with long-term comeback potential are Skechers(SKX.N) and Kenneth Cole KCP.N.

"Things aren't generally getting worse and in many cases we're getting a little bit better," Kravetz said. "If you stick to your game plan and let the markets come to you," challenges in the past nine months will prove a "gift in disguise."

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Leslie Adler )

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