Reasons to be bullish on J.P. Morgan, energy

Ed Cowart, portfolio co-manager of equity income and value strategies at Eagle Asset Management, the $19.5-billion asset management unit of Raymond James, offers up his thoughts on a few market sectors that are catching his eye. Cowart manages Eagle's 5-star rated Growth & Income Fund. • Financial sector: “JP Morgan is currently one of the biggest and strongest of big financial services companies. We agree with Jamie Dimon's statement that JPM has a ‘fortress' balance sheet. Whatever the new capital regulations bring, JPM is going to be in great shape and will pick up share from the weaker competitors and we think this company can pick up dividend over the next year and a half or so.” • Energy sector: “One thing I'm going to watch as an investment opportunity in 2012 is energy. Geologists have found maybe 100 years of natural gas locked in shale that would have been ignored a decade ago. Companies such as Halliburton and Schlumberger have developed technology that now enables us to take gas out of those rocks and create a sustainable, renewable resource there. Some shale deposits also contain oil. And, for the first time since 1970 when Alaska's North Slope came on line, we are seeing a significant increase in domestically produced oil primarily from the Dakotas and South Texas.” • Overall 2012 investment outlook: “I see the market staying within a trading range for the next three years with no major breakouts. The corporate sector is in solid shape but there will be sluggish growth. I believe what remains key is trying to own companies that are going to do well in a difficult environment and, luckily, we have a lot of companies out there in really good shape. Historically, when valuation spreads between stocks and bonds are as wide as they are right now, when you have a 10-year rate of return for the S&P 500 at virtually zero … well, most of the risk is out of the market. I don't know whether we're going to have a big bull market, but I don't believe there's a lot of risk right now on the valuation front.”