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Advice to Short-Term Investors: You Can't Make Money

Robert HolmesSenior Writer

BOSTON (TheStreet) -- If you think you can make a few bucks here and there in today's volatile stock market, RNC Genter Capital Management's Dan Genter has advice for you: Get out.
"The reality is that, if someone is trying to trade this market, it's not a winning game right now," Genter says. "If you have very short-term goals, you're much better off sitting on the sidelines, keeping your powder dry, waiting until the clouds clear a bit, and then you can see through the fog and have some visibility. Then you can start to make some informed decisions."
On the other hand, Genter, who is based in Los Angeles and has $3.7 billion in assets under management at his firm, says long-term investors many never see the same values again. The S&P 500 Index's price-to-earnings ratio is 12 times profit estimates for the next 12 months, compared with 18 times during periods with a similar inflation rate, Goldman Sachs senior strategist Abby Joseph Cohen said last week.
Genter's advice is to review U.S. companies' earnings reports and pick those with the best predictability.
"We actually have a good earnings parade here in the U.S. But the black clouds that we have from Europe are raining on the parade," Genter says.
Genter's firm, which has been operating since 1968 and exclusively manages separate accounts, recently has been leaning on technology stocks after stellar third-quarter reports. Tech companies are getting a boost as their customers are increasing capital budgets, helped by a federal tax break.
"People are going to use technology as a substitute for rehiring labor," Genter says. "As we get into that capital-replacement cycle, because we're behind it now, you're going to continue to see that deployment, in both hardware and software."
Intel is one of Genter's favorite stocks. While he acknowledges the chipmaker no longer produces skyrocketing growth, Genter expects Intel to see growth of about 10% a year from its new chip technology. He also notes that the stock trades at a price-to-earnings ratio of only 10, below the broader market's multiple of about 12, and pays a 3.5% dividend, which is higher than the benchmark U.S. Treasury yield.
The theme of dividends extends beyond technology. Genter points out that 388 of the S&P 500 constituents currently pay a dividend, with 14 initiating dividend payments this year. Genter is a fan of companies that are returning cash to investors.
"The job of finding high dividend-paying companies is easier," he says. "You can find those companies, and if you get 4% to 5%, I mean, let's face it. You're getting double what you're getting in a 10-year U.S. Treasury bond right now. And even if the market three years from now ends up what we've seen in the last 30 days, if you collected 4% to 5% a year, you're 15% ahead and at least you're making money."
-- Written by Robert Holmes in Boston.

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