The first month of the year is time for Barron's roudtable. There were 10 panelists for 2012:
- Scoot Black - Delphi Management
- Fred Hickey - The High Street Strategist
- Abby Joseph Cohen - Global Markets Institutes
- Brian Rogers - T. Rowe Price
- Marc Faber - The Gloom, Doom & Boom Report
- Meryl Witmer - Eagle Capital Partners
- Mario Gabelli - Gamco Investors Inc.
- Oscar Schafer - O.S.S. Capital Management
- Bill Gross - Pimco
- Felix Zulauf - Zulauf Asset Management
They discussed their views on the economy and markets and gave their picks for 2012.
Here are Marc Faber's Picks for 2012:
Source: Bloomberg
Here's the part of Barron's Roundtable where he explains his long picks:
Faber: My preference is asset
diversification, as we don't know how much money governments will print,
the size of fiscal deficits and so forth. The biggest uncertainty is
what will happen to the Chinese economy. The Chinese probably can
continue to muddle through, easing interest rates again to keep things
up. But we're dealing with an economy driven by capital spending, which
is driven by credit, which wasn't the case until 2008.
Faber: There is a huge amount of
underground lending throughout Asia. Mr. Bernanke can drop his dollar
bills on the U.S., but the growth in dollars here can lead to strong
economic growth and inflation in other countries. That has happened in
the past few years. I am the most bearish person you can imagine on
earth, which is why I recommend putting, say, 25% of your money in
equities, 25% in precious metals, 25% in cash and bonds and 25% in real
estate. These assets won't go up substantially this year, but they could
preserve your wealth.
People say large-capitalization stocks are inexpensive, and I agree. I
would buy a basket of high-quality big-caps in Europe and the U.S. You
can by
Total [TOT], in France, which yields more than 5%, and
Nestlé [NESN.Switzerland] and
Novartis [NVS] and
Pfizer [PFE]. These stocks don't have huge downside risk. Because emerging markets saw big declines last year, you could also buy
SATS
[SATS.Singapore], in Singapore, which provides catering services to the
airline industry and ports. It yields 5% and trades for 13 times
earnings. I also like
K-REIT Asia Management [KREIT.Singapore],
a real-estate investment trust that yields 7%. The stock has fallen by
about 50% and the dividend might be cut. But even if it is cut to 4%,
this is an OK investment. These stocks won't go up right away, but
reinvesting dividends will yield an adequate return over time.
StarHub [STH.Singapore], the mobile-phone company, yields 6.9% and the P/E is 14.
Zulauf: If China decelerates sharply, won't markets like Singapore have another big hit?
Faber: The question is, to what extent
has that been discounted already? They could fall another 20%, but a
luxury-property developer like
Wing Tai Holdings
[WINGT.Singapore] already sells for half its book value. I am positive
about Singapore in the long run because more Europeans are moving there,
and to Hong Kong. Because of banking-secrecy laws it is probably safer
to have a bank account in Singapore than Europe.
The Hong Kong market was hit hard, and stocks haven't bottomed yet. But you can buy
Sun Hung Kai Properties [16.Hong Kong], with a P/E of five and a yield of 3.5%.
Swire Pacific [19.Hong Kong] is a blue-chip, a well-managed conglomerate. It yields almost 5% and the P/E is 11.
Hang Seng Bank [11.HK] yields 5.6% and trades for 11 times earnings. There isn't a huge risk in these stocks, but maybe I'm too bullish.
and his short picks:
Faber:
IBM
[IBM] is a good short. It is the back office of the world. There is
room for earnings disappointment. If China implodes, the Australian
dollar will go downwhill. That's another short. A third is
Salesforce.com [CRM], which I recommended shorting in the June Roundtable ["Buy Low, Stay Nimble," June 13, 2011].
Faber: Order, order. I haven't finished.
Fraser & Neave
[FNN.Singapore], in Singapore, is a conglomerate similar to Swire. It
sells for 10 times earnings and yields about 3%. It could become a
takeover target at some point. Lastly, I am the chairman of the India
Capital Fund [an open-end fund sold outside the U.S.]. The fund and the
Indian currency have been hit hard, and the fund could go lower. But the
U.S. outperformed India last year on the order of 40%, and the Indian
market looks attractive at 12 times earnings. As Chen Zhao at BCA
Research said, in China the macro backdrop is fantastic and the micro is
a disaster, but in India the macro is a disaster and the micro is
fantastic. India has very good companies. The fund is overweight the
banks and has a P/E of 10.
Last year I was overweight the U.S. relative to emerging economies.
At what stage will the outperformance of the U.S. cease and emerging
markets rise again? It could be three or six months, or a year. I am
gradually increasing my exposure to emerging markets. Thai and Indian
banks have no exposure to Europe. Indian banks lend domestically.
Why is the Indian economy having trouble?
Faber: Money-printing in the U.S.
created food and energy inflation. In poor countries the percentage of
per capita income spent on food and energy is much higher than in
advanced societies.
Faber: Yes. Credit was growing rapidly
and the hangover period could last for a while but these markets are
good long-term investments. I travel extensively in these countries and
you can see the growth of economic development. People go from bicycles
to motorcycles, and from motorcycles to cars. First-time buyers of cars
jump socially, as do first-time buyers of homes. Thailand has several
consumer-credit companies. Buyers will do everything to pay off their
loans. They aren't going to walk away. Plus, bankruptcy laws are tough.
Hedge funds performed badly last year,
with few exceptions. Why is that? The bond market was strong, gold was
up 11% and the U.S. market was flat, but sectors such as utilities did
well. This year the economy could contract and stocks could go ballistic
as central banks print money. If investors are diversified, they might
do all right.
If you are interested in the full Barron's roundtable transcript and have the time to go thru the 9 pages, you can do so by reading the article
Listen Up, Class: Here's How to Profit.
