Stanley Nabi, the chief strategist of Silvercrest Asset Management, swung by Breakout to give us his views on the Fed, the tape and why you can still be long some more prosaic stocks despite the fact that his firm has a lower-than-average outlook on S&P earnings.
Nabi refers to his investing style as "value-defensive," and his picks are consistent with that description. He's sticking with the prediction of 10% to 15% returns for the S&P 500 in 2011, a call the strategist made at the beginning of the year. He bases that in part on his conviction that the end of QE2 in June will mean absolutely nothing in terms of market impact, comparing the anticipated chaos from the end of active stimulus to the end of the Y2K scare.
That's not to say that Nabi feels the Fed isn't facing plenty of challenges, largely in the form of inflation becoming impossible to ignore. With the PPI (producer price index) rising at 5% to 6% and the CPI (consumer price index) under 2%, something's got to give, either in margins or price increases for the consumer. Nabi thinks the disconnect is going to resolve itself in shrinking margins for corporate America -- not a shocking assertion with profitability at an all-time high.
Despite all of the above, Nabi still regards the U.S. market as the "cheapest asset in the world, risk considered." Some of his stocks for the here and now include IBM (IBM), Johnson & Johnson (JNJ), Johnson Controls (JCI) and Halliburton (HAL). While noting that Halliburton has a somewhat checkered past in terms of publicity, he sees Dick Cheney's old operation achieving "double-digit earnings."
He has his limits, though, eschewing former leaders in the energy space. "Less than a year ago Exxon (XOM) was trading at $55" compared with today's $86 and change. As for relatively ignored financials, Nabi is staying away from some of the usual suspects, sticking instead with insurance giants MetLife (MET) and Hartford Financial (HIG).
"You can't own everything," he says -- but he still managed to give us more than a few ideas among the giants hiding in plain site.
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- S&P 500
- market impact
- corporate America
- producer price index
- the usual suspects