Investment Expert Brian Kirkpatrick to Moneynews: There Is Opportunity in Stocks

Friday, 08 Feb 2013 07:13 PM

By Michelle Smith and David Nelson

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Many investors are playing the stock market contrary to the old adage: buy low, sell high. Is it a setup for disappointment? Brian Kirkpatrick, Chief Investment Officer of Capital Guardian Wealth Management, thinks not.

Off the lows of 2009 stocks have soared. Some markets are up well over 100 percent. As the markets were gaining most investors were seeking safety, largely in bonds. Now, with markets approaching all-time highs, investors are starting to see value and pouring money into stocks.

Some would argue they are going about it all wrong. Kirkpatrick is not so pessimistic.

There are still opportunities to be had in stocks, he told Newsmax TV in an exclusive interview. Last year was phenomenal and he believes the same will be said about 2013. He encourages investors to employ a “look through” strategy.

Watch our exclusive video. Story continues below.

Ironically, one of the factors bidding up prices is the fact that the average investor has been hiding.

“So you have a marginal increase just in demand from people putting money into the equity markets,” he said.

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013

“Bonds have been a great place to be. They have done well over the last two or three decades but perhaps some of that appreciation has run out.”

Kirkpatrick says his firm's modeling exercises have curbed expectations for appreciation from the majority of fixed income. They expect coupon returns at best and even warn of the possibility of negative return.

Earning yields on equities now look better than bonds and dividend growth continues.

Investors have been able to watch the rise in equities from the sidelines, which has helped to shore up confidence. Kirkpatrick expects investors to be drawn to the opportunity to inch back into an arena where there is low volatility and low beta.

“You also have a healing economy,” he said. “We believe that will continue throughout the year and perhaps even pick up speed in the later part of the year.”

In the United States, employment is improving. There is not really job destruction, there is just low growth, Kirkpatrick explained.

Some have seized onto the negativity in the most recent gross domestic product (GDP) report. Look through that number and toward the future of sustained growth, Kirkpatrick advised.

“We did see a decline of 0.1 percent at annualized rates, but looking through that number we saw strong increases in business development and capital spending as the bright spots.”

The talk of the past quarter was how much uncertainty there was due to the presidential election and fiscal cliff, and that was allegedly having a negative impact on companies' decision making. Yet, the GDP report shows businesses continued to spend, he pointed out.

Europe is a known problem but sovereign yields have fallen to sustainable levels. There will be flare ups but that may actually provide some opportunities to get in, Kirkpatrick said.

We're at a point where we no longer expect China to have a hard landing. The declining GDP seen over the last several years has stabilized and picked up slightly over the last reading.

“So again, that points to more global equities for some opportunities,” he said.

And what about the unresolved issues that loom ahead: the debt ceiling, the continuing resolution and the sequester?

“Again, look through that,” Kirkpatrick says. “What we have learned from the past is that some of that volatility created from these events is most likely going to be resolved.”

“If there is somewhat of a selloff and, of course, the macroeconomic environment stays on the trend that we're seeing, then we advise actually buying the dips essentially and piecing back into the market using that in your favor.”

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2013

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