Doug Kass: Going Cash and Shopping
theStreet.com's Doug Kass is going cash and putting a shopping list together of quality stocks. As usual Kass' insight on the market and what he believes is the best course of action should be noted, including solid companies such as 3M (NYSE:MMM), Disney (NYSE:DIS) and Transocean LTD. (Public, NYSE:RIG).
Doug is pushing a larger cash position in his portfolio, from 43% to 54%. He also recommends equity (to 41%) and credit exposure (5%) after a huge run in both asset classes.
Over the balance of this year, Kass expects to further reduce the portfolio's recommended investment positions and raise cash weightings if there are (1) renewed signs that my baseline expectation of a double-dip in the economy is rising in probability; and (2) we witness a dissipation in the strong price momentum that has characterized the U.S. stock market over the past several months.
Doug put together a list of shopping list of individual stock candidates (by sector) that might be considered in the aforementioned Kass Model Portfolio.
Technology: Microsoft (MSFT) and Dell (DELL).
Financials: I am eliminating Prudential (PRU), MetLife (MET), Hartford (HIG), PNC Financial (PNC), SL Green (SLG) (convertibles) and National Financial Partners (NFP) (convertibles). Remaining are Bank of America (BAC), Cohen & Steers (CNS), Chubb (CHB), JPMorgan Chase (JPM), Loews (L) and SLM Corporation (SLM).
Energy: Transocean (RIG).
Health Care: Staying with selected HMOs.
Consumer Staples: Dropping General Mills (GIS) and Unilever (UN), adding PepsiCo (PEP), remaining is Procter & Gamble (PG).
Industrials: Dropping 3M (MMM), remaining are PPG Industries (PPG)and Union Pacific (UNP).
Consumer Discretionary: Remaining are Home Depot (HD), Lowe's (LOW), Disney (DIS) and eBay (EBAY).
Materials: Remaining is Freeport-McMoRan Copper & Gold (FCX).
Utilities: Duke Energy (DUK), Dominion Resources (DRU) and PG&E (PCG) remain.
Telecom: Remaining are Verizon (VZ) and AT&T (T).
|S&P Weighting||Recommended Weighting||Rationale for Weighting|
|Technology||18%||7%||Business spending will remain subdued, and the sector is now overowned|
|Financials||13%||6%||The risk of a double-dip augurs poorly for credit metrics|
|Energy||13%||5%||Commodities, like energy products, are vulnerable to a slowdown|
|Health Care||13%||4%||Government intervention threatens pricing|
|Consumer Staples||12%||5%||Exposed to generic trade-down as consumer weakens|
|Industrials||10%||4%||Shallow and uneven economic recovery remains a headwind|
|Consumer Discretionary||9%||3%||Accumulated job losses and wage deflation weigh on consumer|
|Materials||4%||2%||Shallow and uneven economic recovery remains a headwind|
|Utilities||4%||2%||Exposed to a further spike in interest rates|
|Telecom||4%||3%||Secular prospects remain strong|