LONDON Hedge fund manager Patrick Armstrong is backing his confidence in the technology and luxury goods sectors by buying shares in Apple and holding his positions in the likes of LVMH and BMW.
Armstrong, who co-manages $220 million as head of investment selection at Armstrong Investment Managers, believes that such companies will help to drive the S&P 500 and other stock markets to new highs in 2013, aided by central banks' pro-growth policies and fast-growing emerging markets.
"Some equity markets, including the S&P 500, will reach their all-time highs (in 2013)," the former co-head of Insight Investment's $2 billion multi-asset group said in a statement.
Technology companies are expected to flourish in emerging markets. In India, for example, sales of tablet computers are expected to at least double this year to six million, research firm CyberMedia said on Friday.
Armstrong's Diversified Dynamic Solution fund returned 8 percent in the first 11 months of last year, against a hedge fund industry average of 3.17 percent in the year to December 28, Hedge Fund Research data shows. His fund lost 0.2 percent in 2011 but made 12.3 percent in 2010 and 31.3 percent in 2009.
The 41-year-old's bullishness on stocks echoes that of other hedge fund managers, many of whom have turned positive as a result of action by central banks to prop up economies and boost growth. The European Central Bank, for instance, promised in September to do whatever it takes to protect the euro zone.
The consensus forecast among equity strategists in a Reuters poll in December was for the S&P 500 to finish 2013 close to the record high of 1,576.09 recorded in October 2007. The index, which rose 13.4 percent last year, was up 0.23 percent at 1462.75 at 10:29 a.m. ET on Friday.
However, some commentators believe that stock markets could be hit by continuing recession in the euro zone and further budget wrangling between President Barack Obama and congressional Republicans in the United States.
Armstrong told Reuters he had been buying shares in Apple and British chip designer ARM during December.
Apple's iPhone and iPad products helped to propel its shares to a record high of $705.07 on September 21, but the price fell to a little more than $500 last month after analysts cut shipment forecasts on concerns over competition from phones using Google's Android operating system. At 10:29 a.m. ET on Friday the shares were down 2.4 percent at $529.21.
On Wednesday Leon Cooperman, CEO of hedge fund Omega Advisors, said he is optimistic about stock markets this year, while bonds are in a "bubble". Cooperman said he owns shares in Apple, despite being wary of the company's hoarding of cash on its balance sheet.
Armstrong said he likes companies offering high growth, and that he is also holding on to positions in luxury goods companies such as L'Oreal, LVMH and BMW.
"We prefer to pay premium multiple(s) to get premium growth - (we're) not convinced (by the) margins and growth of the staple companies," he said.
He has started shorting consumer staples stocks Nestle, Unilever and Procter & Gamble. Shorting is the selling of stock you have borrowed in the hope of buying it at a lower price later to complete the trade, thereby profiting from falling prices.
He also said that 2013 "will mark the beginning of a bear market for government and high-grade corporate bonds, which will run throughout the remainder of the decade".
Armstrong expects investors to move out of expensive government bonds into higher-yielding equities and said that he is shorting French and German government bonds.
(Editing by Sinead Cruise and David Goodman)