| NEW YORK
NEW YORK Volatility in equity markets is creating opportunities for investors to position themselves for a resumption of the bull market next year, according to billionaire investor Ken Fisher.
Fisher believes the U.S. stock market will finish only slightly higher this year before returning to the winning ways of the previous two years, when prices doubled in the wake of the financial crisis in 2008.
Fisher, founder of Fisher Investments, which manages about $38 billion in equities, has also underweighted emerging markets because he believes they are too popular.
"When returns categories are low overall micro decisions become the be-all-and-end-all," said Fisher. "In my mind what you want to be doing now is buying things that you think will do well as the bull market resumes with gusto in 2012."
He believes technology will benefit due to long-term cyclical trends. He owns companies with low valuations that will ride on the coattails of new phenomena such as cloud computing rather then companies in the forefront of those innovations that often command a hefty premium.
Those include companies like hard disk drive makers Seagate Technology (STX.O) and Western Digital WDC.N, semiconductor company Micron Technology (MU.O), and integrated circuit maker Linear Technology LLTC.O. Fisher is overweight technology.
Those companies, all of which Fisher owns, are trading at valuations below or at the level of the overall market. Those valuations range from just six times earnings for Micron Tech to over 13 for Linear, which is well below direct cloud computing plays like NetApp (NTAP.O), which trades at nearly 30 times earnings.
Fisher is also looking at drug stocks, which he says typically "have their day in the sun" in the later stages of a bull market. They will also benefit from an aging baby-boomer population, still the economically dominant demographic in society, he says.
"These are stocks selling at single digit P/Es with proprietary products," he said. "There are negatives, the patents run out and they have a hard time developing new drugs, but they have a lot of drugs."
Fisher cites big drug makers like Pfizer (PFE.N), Johnson & Johnson (JNJ.N), Merck & Co (MRK.N) and Amgen AMGN.N, none of which he currently owns.
He does, however, expect to own drug companies by the end of the year.
He also believes President Barack Obama's controversial healthcare bill, which was a headwind for some healthcare stocks, will be struck down before the bull market has run its course. "Stocks will discount that before it happens," he said.
Other companies that Fisher is eyeing are those that he believes have standout chief executives, such as Ursula Burns at Xerox Corp (XRX.N).
"Every late-stage bull market generates CEOs we love and CEOs we love to hate," he said. "Early in bull markets we don't do much what you could think of as hero worship of CEOs but late in bull markets we do."
(Editing by Leslie Adler)