Ace money manager Jeremy Grantham lists U.S. blue chip stocks as his favorite investment category now.
His firm’s GMO Global Balanced Asset Allocation fund devoted 31 percent of its assets to blue chips as of Dec. 31, Bloomberg reports.
The fund’s holdings include Microsoft, Wal-Mart, Johnson & Johnson, Oracle, Procter & Gamble, Pfizer, Coca-Cola, ExxonMobil, Cisco, Chevron, Pepsi and Google.
He isn’t bullish on stocks as a whole. “The market (the Standard & Poor’s 500 Index) is worth only 850 or so,” he writes on the firm’s Web site.
“Thus, any advance from here will make it once again seriously overpriced.” The S&P 500 currently stands at about 1,120.
But not everything is overpriced, Grantham says. “The high quality component is still relatively cheap.” By that he means blue chips.
For the long term, Grantham is bullish on emerging market stocks. He expects them to rise about 4 percent a year through 2017, as investors react to strong economic growth in those countries.
“Why not go along for the ride?” he told Bloomberg.
Overall, Grantham sees a difficult investment period coming. “It will feel like the 1970s. One step forward, one step back.”
Others agree with him about U.S. blue chips. Neil Hennessy, chief investment officer for Hennessy Funds, likes ones with dividends.
That, includes IBM, McDonald’s, Tupperware and Wal-Mart, he told CNBC.
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