Hank Smith is bullish the way hell is hot. While not oblivious to the dangers of Europe, the Chief Investment Officer of Equity at Haverford Trust thinks the volatility of 2011 was largely a function of "three external shocks" unlikely to be replicated.
With so much fear and skepticism built into the market, Smith thinks an economy able to "muddle along" will be sufficient to keep the recent uptrend in place for much of 2012. Reasoning that people have to do something with their money other than stuffing it in a mattress or investing in yield-free Treasuries, Smith says it isn't going to take much to support strength in stocks.
"All we need is incremental improvement in confidence and sentiment," the bull tells me in the attached clip, "and we could see some of this (sidelined) cash come into the market."
Opining that based on yields and price to earnings ratios (P/E), equities are cheap as they've been since the 1950's, Smith is concentrating on big, dividend paying stocks to take advantage of the situation.
Looking for specific names? Grab a pencil. In the order in which they're named in the attached clip, Smith likes:
Pepsico (PEP), Proctor & Gamble (PG), McDonald's (MCD), Intel (INTC), Microsoft (MSFT), Pfizer (PFE), Eli Lilly (LLY), Johnson & Johnson (JNJ), Abbott Labs (ABT), DuPont (DD), Eaton Corp. (ETN), ConocoPhillips (COP), and Chevron (CVX).
Narrowed down to sectors, he's keeping a balance between defensive and cyclical. With a little Tech (XLK) and Consumer staples (XLP). The commonality is dividends and Smith's desire to buy. Disagree though you may, the man doesn't waffle.
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- Hank Smith