Portfolio Manager Perspectives

Jeff Benjamin

Investors missing out on ‘epic earnings recovery,' says Putnam's Thakore

Thinks U.S. companies are ‘swimming in cash and minting money'; hard to be negative

May 24, 2010 @ 11:26 am

By Jeff Benjamin

The economy is in a lot better shape than most people think, according to Nick Thakore, manager of the $4 billion Putnam Voyager Fund Ticker:(PVOYX).

“People have been so burned that they're missing the cyclical recovery and an epic earnings recovery,” he said. “It looks like 2011 could be an all-time earnings record for the S&P 500.”

Mr. Thakore took over management of the growth fund in November 2008, and since that time he has found opportunities in the stock market's volatility.

“At the market's bottom, it created the best investment opportunities of my career,” he said.

While it's a different ballgame now — and some “secular” concerns remain — Mr. Thakore still sees “tremendous opportunities” in the stock market.

The driving forces? Government stimulus spending and corporate inventory restocking.

“Right now, job growth and capital spending is producing a better outlook than the market believes,” he said. “Companies overcut during the downturn and they are starting to hire again, and capital spending is the lost story.”

With the exception of the financial sector, he said, “American companies are swimming in cash and minting money.”

Mr. Thakore did acknowledge some worries about rising taxes and high debt levels in both the U.S. and Europe.

“Ultimately, I believe the debt issues in Europe will get resolved,” he said. “But the U.S. debt is part of the secular concerns, and we will have to eventually deal with that.”

And then there is always the specter of another liquidity crisis, in which case, he said, “all bets are off.”

Nevertheless, Mr. Thakore is staunchly bullish on the opportunities in the equity markets, although he understands why so many retail investors are still avoiding stocks or are now moving out of stocks.

“It's a very natural reaction to be scared,” he said.

But based on his analysis, Mr. Thakore said, “it's hard to be too negative.”

One of the stocks Mr. Thakore is making a case for is DIRECTV Ticker:(DTV), which he said has “three ways to win.”

The digital television provider is adding customers, is poised for strong earnings growth, and is a potential acquisition target, according to Mr. Thakore.

The company is also helping boost its stock price through an aggressive buyback program that could include the repurchase of up to 30% of outstanding shares over the next three years.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.

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