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Haverford Trust V.P. Hank Smith on the outlook for the markets and how investors should adjust their portfolio for the year ahead.
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-- mystic about how the markets we'll end the year and how they'll start out the new year he says that the current levels.
At these current levels.
He is a buyer of stocks -- now joining me now is Hank Smith vice president and chief investment officer for however for trust -- before we talk about strategies for 2012.
I want to talk about looking back at 2011 because this is a reflective time of year for for most of us on so many different levels.
What's the biggest take away that you have from this very volatile year and the learning single kind of push it into -- into 2012.
Well how fragile -- slow growth economy can be because we had to pick it -- beaten to external shocks that.
Basically through the economy almost into a double -- -- in the Arab Spring with rising oil.
And the Japanese tsunami also the adverse weather in the mid -- later in the spring.
All added up to almost zero growth so in a slow growth economy which we are going to continue to be -- primarily due to deleveraging.
You are more susceptible to these types of its external -- so that is one take away.
Without an external shock though we believe GDP.
Should continue -- -- positive.
And the risk of a recession is really -- rather small without external shock due to the extraordinary monetary stimulus that continues to be in place.
There is a lot of uncertainty ahead of us here as we going to 2012 I know that you believe -- -- a buyer right now but the act -- -- -- external factor as he's external catalyst.
How would you strategize your buying activity how do you go through I mean does it calendar turned -- 112012.
And then you start to dip then do you do you wait a few days.
How do you play these market.
Full first let's start with this very basic -- the economy is expanding -- not contracting profits are rising they're not falling.
Balance sheets are extraordinarily healthy with a record cash.
And valuations are as cheap as they've been in thirty years -- that's the only information is provided you're tend to be a buyer on that kind of news.
We are in a slow growth economy so we think a balanced approach.
Focusing on quality securities between the defensive side of the marketplace and consumer Staples and health care.
And then exposure to the more cyclical side and industrials and basic industry.
And we think the key theme throughout 2012 will be dividends.
Dividend paying stocks are today's fixed income.
You have some specific names that have these healthy dividend yields Johnson and Johnson and you read on Procter & Gamble Microsoft -- -- defensive plays to some extent to mean Jane -- -- There's some -- defensive yet they are.
Also.
I'm giving -- a return in terms in dividends to do we need to be sort of defensive.
Going through 2012 in the same -- looking for as many sources of income as we can.
Well -- the opportunity that still exists yes they did very well.
These high dividend paying stocks in 2011.
But the yields are still there and all four stocks that you just mentioned.
Had dividend yields that exceed that of their own ten year debt that is why we call that today's fixed income.
Let's also talk about some -- your dues and -- one of the things you don't suggest our viewers do is buy treasuries and that's interesting because.
That has been a safe haven play if there ever were one in 2011 you don't think that trend will continue however.
No I feel like oh we are in 1999.
Where for three years value managers were saying tech and Telecom is the most over valued sector so throughout the past three years we've been saying the same thing -- treasuries.
We've yields so low the risks in our view I'll do not.
Correspond with the returns intraday.
In the other the other do you in don't you have our focus on dividends out which we talked about.
Don't focus on market timing a lot of people every single -- I feel like in.
Especially those highly volatile month that we had in the summer and early fall they said to -- the experts buy and hold is -- you don't believe that to be the case.
That -- -- when you start hearing that type of rhetoric you know it's exactly the time to start buying and holding.
Based on the great valuations.
Good corporate profits.
By these good companies and then have patients to think that you can trade around the volatility it's a fool's game.
No one on Friday after Thanksgiving in the worst Thanksgiving week since we since Thanksgiving was a holiday.
-- in 1942.
No one was buying in anticipation of one of the best weeks of the year the following week after thanks.
One another exit they you have current -- our viewers it is don'ts invest in gold it's a fair trade not an investment now that's another contrary and point of view when we have so many people come on -- seen a gold is up 15% your day.
Would have missed out on the gains had he not made that trade.
Well that's true but -- -- gold is a speculation it's not an investment there's no one error rate of return with gold.
You're totally dependent as you are with other commodities.
For the next buyer to take away from -- at a higher price that is more speculative than investments.
Then invest in really.
So gold is about fear.
And just listened all the radio advertisements its fear of inflation fear deflation fear of deficits fear the political situation.
And that bell does not get wrong that the toppled markets it's usually an indication we're closer to a bottom.
Hanks met that have -- trust you're a believer in these markets a believer and buy and hold still ringing through thank you very much thanks for joining us have a good and happy new I think you're too.
