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Likely Torch Bearers In The Market If The Economic Recovery Sustains, WSFS, PEI, IDTI, MCHP, MWA

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With the economy displaying some promise of sustained recovery going forward, market experts are already busy devising strategies for regaining lost ground in terms of portfolio performance. The 4,000 point recovery in the Dow, from a low of 6,000 levels has given them the drive to plan for capturing any further up move in their portfolios. The key to this desired recovery in portfolio performance lies in picking a right mix of sectors which are likely to lead the way, as well as arriving at an optimum exposure ratio between the domestic and the international markets, so as to capture the upside across the world markets as well.

The first sector to gain their confidence is Financial Services. The massive beating that this sector has suffered, the valuations seem to have reached the illogical band on the lower side of the spectrum. Therefore, experts are scanning for strong performance contenders amongst the smaller banks, diversified financials and non- banking firms. Stocks of companies like WSFS Financial (NASDAQ: WSFS) and Pennsylvania Real Estate Investment Trust (NYSE: PEI) are on the active radar of the experts looking at this sector with a microscope.

The second sector to find favor is Technology. There is a significant correlation between economic recovery/ performance and the fortunes of this sector. To that extent, the recovery thus far from the depths of last year has already created quite a few market winners from this sector. However, the experts feel that there still exist quite a few exciting prospects, particularly if the recover gains strength. Thus, a company like Integrated Device Technology (NASQAQ: IDTI) is looking attractive from the growth angle, whereas Microchip Technology (NASDAQ: MCHP) is finding favor from the dividend play perspective.

The third sector of choice of the experts is Industrials, given its obvious linkage with economic recovery and growth. Given the stimulus plan spending on water systems, water infrastructure related plays like Mueller Water Products (NYSE: MWA) are being actively acquired in the portfolios. Also the established infrastructure majors like Caterpillar (NYSE: CAT) are also finding favor from the portfolio managers.

Health Care is the fourth favorite of the market experts. Companies from the fields of Orthopedics and Diagnostics are being added to the portfolios, Myriad Genetics (NASDAQ: MYGN) being a prime example from this set. Also, large and established houses such as Johnson and Johnson (NYSE: JNJ) are also amongst the picks for the portfolios.

As regards exposure across the markets, a judicious mix of 40 % exposure to US stocks and 60% exposure to international equities is being considered as an optimum portfolio. In the International component of the portfolio, quality growth leaders from the emerging economies are being considered as the right choice. The markets being favored include Brazil, Russia and Eastern Europe.

 

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