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3 sectors to own this summer

Pras Subramanian

As summer rolls on and the trading on Wall Street tones down a bit, one strategist says investors should not be tempted to sit pat and leave their portfolios as is. Sam Stovall, managing director of U.S. equity strategy at S&P Capital IQ, has his top three sectors to own now for your portfolio.

1. Health Care

“This area has below average P/E ratios… [and is] also expected to see market type growth in earnings, also a lot of M&A activity going on in this category, which has helped to propel prices and we think the trend remains your friend in this category.”

2. Industrials

“We believe we are in the middle to the latter part of this economic expansion… We still think industrials, which is a mid-cycle sector, will continue to be a good area in which to find high-quality stocks.”

3. Technology

“We think the major tech companies, the larger blue chip stocks, have very strong balance sheets which could also assist them in the area of M&A activities and help them streamline their businesses.”

In terms of what he’s avoiding, Stovall is selling telecom, which is not expected to see growth in earnings, in addition to having stretched valuations. Utilities, although experiencing a nice run in early 2014, areexpected to be up only 2% for rest of the year. Stovall says investors are blindly chasing yield with these names.

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