What to Invest in Next Year?

In a time of slow global growth, aggressive moves by central banks, and paralyzed fiscal policies around the world, conventional investment rules hold little significance.

For this reason, Bloomberg Markets gathered a team of seasoned investors who have consistently outperformed the market in recent years and asked them where and how to invest money in 2013.
David Herro, a portfolio manager at Harris Associates, which manages assets worth nine billion dollars, claims that next year one should invest in Japan and technology company stocks.
– Next year has strong potential and could be very good for stocks. It is necessary to take a good look at Japan, where stocks are relatively cheap compared to other developed markets. Likewise, the Japanese industry is based on technology, which is a very attractive sector for investment. Technology company stocks have grown very slowly this year, and the fundamentals show that they are still a good story, says Herro.
Quincy Krosby, a manager at Prudential Financial, claims that agriculture is the right choice for 2013. According to her, due to global demographic trends, stocks of agricultural companies must be in every serious portfolio. In addition, Krosby recommends more exposure to energy and mining as these sectors could benefit from rising demand in China.
Dinakar Singh, co-founder of TGP Axon Capital, says that next year one should heed the advice of the famous comedian Eddie Murphy:
– About ten years ago, Murphy mocked actors in horror films on Saturday Night Live. They would hear voices of ghosts that would drive them out of the house. But instead of leaving the house, all the actors would go investigate the voices, which usually ended in a massacre. Therefore, in the market, it is sometimes better to listen to the “voices of ghosts,” leave the market, and wait for better times. A haunted house may be cheap, but it has little value, he warns.

Chris Leavy from BlackRock is far more optimistic and lends his voice to American stocks. He explained that American companies are currently flush with cash that will pay off to shareholders through dividends over the next year. Additionally, next year American corporations expect revenue growth, despite sluggish global growth.
Andreas Utermann from Allianz recommends cautious buying of debt securities from eurozone member countries. He is convinced that significant steps have been taken since this summer that lead to the resolution of the European debt crisis. Although the details of the banking union are not known, and political uncertainty persists, Utermann claims that all major risks in the eurozone have been eliminated.
Doug Ramsey, head of Leuthold Weeden Capital Management, fully agrees with this stance.
– The American bond market has gone downhill and is no longer attractive to investors. The European bond market (especially corporate) offers an annual yield of about four percent, which is almost double the average dividend yield in the U.S. The advantage of the European corporate bond market is that large global investors have not yet driven the prices of securities through the roof, he concluded.