Portfolio Manager Perspectives

Jeff Benjamin

Blue chips set to bounce, says Al Frank Asset’s Buckingham

Many investors are overlooking the strength of profits at well-established companies that pay dividends

Jul 27, 2010 @ 2:56 pm

By Jeff Benjamin

Blue-chip stocks are the best place to invest right now, says John Buckingham, chief investment officer at Al Frank Asset Management Inc.

“There’s still a lot to be concerned about, but there’s also a whole pile of money out there that needs to earn more than it is earning right now,” he said. “When investors are willing to accept a little more risk they will move into larger-cap dividend-payers and that’s when blue chips will have their day in the sun.”

Mr. Buckingham listed more than a dozen stocks that are paying dividend yields of 3% or more, which is better than the 10-year Treasury bond, including: Verizon Communications Inc. Ticker:(VZ), The Home Depot Inc. Ticker:(HD), The Coca-Cola Co. Ticker:(KO), and Abbott Laboratories Ticker:(ABT).

The Al Frank Dividend Value Fund Ticker:(VALDX) uses dividends to help boost the returns of undervalued stocks in the portfolio.

Al Frank Asset Management has $450 million under management and another $1.1 billion under advisement.

While not bullish on the entire stock market, Mr. Buckingham does believe large-cap companies with strong profits will outperform in the near future. He noted that the strong year-over-year corporate profits need to be considered in the context of where the economy and the market were a year ago.

“The stock market sold off prior to earnings season because we had nothing but bad news, and two weeks ago we saw one of the worst sentiment ratings from individual investors,” he said. “Right now public perception is much different than corporate profits.”

Comparing profits and performance on a quarterly basis provides a more accurate picture of slower revenue growth.

However, he added, retail sales have held up and that bodes well for the now leaner-operating companies.

“Companies are becoming more efficient and that leads to productivity gains,” he said. “But at the end of the day we need the consumer to hang in there and corporate profits need to stay high.”

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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