Aberdeen Asset Sells Health-Care to Buy Industrial Stocks – Bloomberg 09-09-14

Salient to Investors:

Martin Connaghan at Aberdeen Asset Mgmt said:

  • Buying industrial stocks with stable revenue and selling health-care stocks as uncertainty about the global economy has caused cyclicals to lag pharma and other defensive stocks by a margin that is too wide to ignore. The outlook for cyclical stocks won’t necessarily change in the immediate future, but there is a lot of bad news and low expectations.
  • Some industrials such as elevator and escalator makers have stable income from contracts that make them less sensitive to global growth.
  • Some industrials are not as cyclical as they appear at first glance if you look at their revenues, because there is always a base level of income and revenues coming from areas that are more stable, regardless of the economic environment.

Worldwide industrial shares are trading near the lowest valuation relative to health-care stocks in more than a decade.

The MSCI World Industrials Index trades at 18 x earnings versus 22 x for the global health-care index, the widest margin since October 2002.

US ETFs tracking health-care have attracted $4.3 billion in 2014 versus $530 million for industrial ETFs.

Read the full article at http://www.bloomberg.com/news/2014-09-09/aberdeen-asset-sells-health-care-to-buy-industrial-stocks.html

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Defensive Trading Undone in $2 Trillion S&P 500 Rally – Bloomberg 07-07-14

Salient to Investors:

  • Rotating into defensive industries has been a losing strategy for the third straight year as personal spending, manufacturing and inflation have exceeded analyst forecasts.
  • The median projection says Q2 GDP grew 3.5 percent.
  • Inflows into health-care and utility ETFs exceed $3 billion in 2014 versus $580 million inflows for tech ETFs and outflows of $3.4 billion for consumer discretionary ETFs.
  • Jeff Korzenik at Fifth Third Bancorp said the jobs report is a clear sign of continued and accelerating economic strength, and says the cyclical leadership in many ways will become more pronounced.
  • Doug Ramsey at Leuthold Group said the very broad move to new highs generally means that the earliest the bull market would top out is 4 to 6 months out at a minimum.
  • Oliver Pursche at Gary Goldberg Financial Services is surprised that the overall risk-off attitude being reflected in fixed-income markets has not caused outperformance in high-quality, dividend-paying stocks.
  • Analysts estimate profits at semiconductor makers to increase 34 percent in 2014 versus 7.5 percent for the S&P 500.
  • Robert Pavlik at Banyan Partners expects a stronger market as consumers grow a lot more confident as the economy starts to show a slight improvement.

Read the full article at http://www.bloomberg.com/news/2014-07-07/defense-trade-coming-undone-in-2-trillion-s-p-500-rally.html

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Woodford’s Cautious Stance See Glaxo, BAT Top 10 Holdings – Bloomberg 07-07-14

Salient to Investors:

Neil Woodford at Woodford Investment Mgmt is cautious on the global economy and is buying sectors resilient to economic downturns like drugmakers and cigarette makers.

Read the full article at http://www.bloomberg.com/news/2014-07-06/woodford-s-cautious-stance-see-glaxo-bat-top-10-holdings.html

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