Al Frank's John Buckingham: Don't shun stocks

The stock market might not perform as well in 2010 as it did last year, but the case for equities is still hard to ignore, according to John Buckingham, chief investment officer at Al Frank Asset Management Inc. “I still don't see a lot of enthusiasm toward equities, which is shocking,” he said. Mr. Buckingham, who manages $460 million, said the amount of money in money market funds is an indication that investors are still traumatized by the market meltdown that unfolded in late 2008. But now that the market has rallied more than 60% from its low in March, he expects a gradual migration to equities — and away from certificates of deposit and money market funds. Such vehicles provide safety but very little yield. “I think the fourth-quarter-earnings numbers will be sensational, and I think you'll start to see more investor optimism, which means the market will react favorably to the earnings,” Mr. Buckingham said.
As a value manager, he said that stock picking won't be as easy this year as it was in 2009. Mr. Buckingham thinks that with the market still below its October 2007 peak, there is value out there. “You need to be more selective now and focus on solid profits and dividend payouts,” he said. The total-return picture is what a lot of investors are missing by sitting in cash strategies, Mr. Buckingham said. “The S&P 500 is yielding 2% right now, and earnings growth will be significant on a year-over-year basis,” he said.