Bob Doll puts his money where his mouth is

Nuveen's chief equity strategist Bob Doll isn't just making a list of 10 predictions. He's created an investable portfolio of stocks based on those predictions. Jeff Benjamin has the details.
MAR 18, 2014
Robert Doll, Nuveen Asset Management's chief equity strategist and senior portfolio manager, is putting his money where his mouth is. The well-known and well-respected strategist has been issuing a list of predictions every year for some time but Tuesday, for the first time, Nuveen is launching an equity unit investment trust based on Mr. Doll's 2014 economic predictions. “It is basically one guy's opinion expressed in 10 different predictions and a portfolio that will do well if those predictions are correct,” Mr. Doll said in summing up the unique strategy. “I didn't create predictions that fit a portfolio,” he added. “I created a portfolio and then applied it to the predictions.” (See Mr. Doll's 10 predictions for 2014.) The Nuveen 2014 Equity Outlook Portfolio (INNEOX) is structured as an evenly weighted 25-stock portfolio that will mature and liquidate on April 10, 2015. Mr. Doll picked the 25 stocks that will be held for the entire period to reflect investment themes of his predictions, and the objective is to outperform the Russell 1000 Index over the 15-month investment horizon of the trust. InvestmentNews caught up with Mr. Doll to dig into his predictions and the portfolio. InvestmentNews: You predicted that the U.S. economy will grow by 3% in 2014 as housing starts surpass one million and private employment hits an all-time high. Would you consider that a bullish outlook, and where are the investment opportunities? Mr. Doll: I guess it's bullish if you can call 3% growth bullish. We are looking for a better economy, and the kinds of stocks that will do well in a better economy are Delta Air Lines [Inc.] (DAL), International Paper Co. (IP), and Macy's [Inc.] (M). IN: What is your outlook for Treasury bond yields now that tapering has officially begun? Mr. Doll: I think the 10-year Treasury yields will move toward 3.5% as the Federal Reserve completes tapering in 2014. Now that they've started tapering, you would have to be bearish to think it will get dragged into 2015 and beyond. IN: What's your outlook for equities? Mr. Doll: It will be another good year, despite a 10% correction. In other words, it will be a very normal year. Last year was abnormal because it was a strong year for stocks but it was also a nonvolatile year. In a year like I'm expecting, you will want to own defensive names like tobacco company Lorillard [Inc.] (LO), Pfizer [Inc.] (PFE), and Verizon Communications [Inc.] (VZ). IN: I noticed you also like high-yield municipal bonds to lead the fixed-income space. What's the logic there? Mr. Doll: The thinking is Puerto Rico and Detroit, et. al., have created negative sentiment for munis, and that is creating a big spread. But, in fact, munis in general are in great shape. Remember that municipalities have to balance the books, so you have a lot of municipalities that are now running surpluses. IN: Why do you believe 2014 will favor active managers over index funds? Mr. Doll: The correlations within the market are falling, just like asset classes are differentiating. Starting in the second half of 2013 for the first time in a while, active funds outperformed indexes, and that will continue. As a portfolio manager, I know that when correlations rise, I struggle and when correlations fall, there is more wind at my back.

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