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Columbia's Pope Favors Big-Cap Stocks Like JPMorgan

By: Investor's Business Daily
Posted: 6/22/2012 1:05:00 PM
Referenced Stocks: CL;JPM;MSFT;ORCL;PG

CHICAGO -- Want relative safety and growth? Invest in U.S. large caps and in emerging market names.

That's what several leading money managers at the Morningstar Investment Conference said they are doing. In a world that looks increasingly unappetizing to investors, that's where they're finding new opportunities.

Guy Pope, a manager of $3 billion Columbia Value & Restructuring Fund , said he finds several U.S. financials attractive. And despite criticism ofJPMorgan Chase ( JPM ) by some politicians, Pope said he still likes that company. Its chairman, president and CEO, James Dimon, is still "one of the best executives out there," he said.

And when interest rates finally do rise, it will boost margins for financials, Pope said.

Pope, who has been a helmsman of Value & Restructuring since 2009, was speaking on a Thursday panel featuring new managers on well established funds.

Pope also said he is finding valuations reasonable in tech names. In addition, many tech leaders have very strong balance sheets.

Sharing similar thoughts, fellow panelist Matthew McLennan said he has invested in software names likeMicrosoft ( MSFT ) andOracle ( ORCL ).

Both companies have been the subjects of controversy, McLennan said. But both get a lot of their earnings from recurring maintenance fees.

That stability and visibility make them very attractive when the market is increasingly unpredictable, he added.

"Whilst many segments of technology are volatile, these are stable," said McLennan, who grew up in and was educated in Queensland, Australia.

Microsoft and Oracle's revenue stability makes them look likeColgate ( CL ) andProcter & Gamble ( PG ). That resemblance to him is reinforced by their price-earnings ratios. At 11 they are lower than the cosmetics-personal care giants' 19 and 16, making the tech names more attractively valued.

In Asia, McLennan said he likes some names in Japan. "After a 20-year bear market, there are some tremendous opportunities for value investors," he said.

McLennan succeeded Jean-Marie Eveillard at the helm of three First Eagle funds in 2009.

Panelist Ian Lapey, successor to Marty Whitman at the helm of $2.7 billion Third Avenue Value in February, likes several Hong Kong-based real estate companies that invest in China. The companies include Henderson Land Development, Wheelock and Cheung Kong Holdings.

Henderson's chairman spent $1.8 billion in 2011 buying shares in his company at an average price of 55, Lapey said. So he thought it was a bargain at that price, Lapey added, and now it is trading around 41. "So you can get it now at a huge discount to what the person who knows it best thought it was worth not long ago," he said.

Lapey added that those companies' growth prospects remain bright despite China's slowdown in GDP growth.

The three managers said they are generally not making big changes in the funds they have taken over.

Lapey said he is controlling risk by reducing weightings in his top 10 holdings. As of March 1 they accounted for 70% of fund assets. Now they are down to 61%. And individual positions that were more than 10% weightings have been trimmed.