The resolution of the European sovereign debt crises would result in upside in the technology, industrials, energy and materials sectors, although staples and utilities are expected to be the best performers in a widespread global recession, says Leon H. Loewenstine, CPA, Managing Director and Chief Investment Strategist at RiverPoint Capital Management.
“In our opinion, we think the probability is that the year will end in positive territory, as long as Europe does not blow up. I don’t know that we’re going to see a 2010 15% kind of return, but I think we could go from where we are at negative 8% to negative 10% to positive territory,” he said.
Loewenstine says Marvell Technology Group Ltd. (MRVL), a computer chip company, is a top pick at 10.4 times earnings with a historical growth rate of 40% and a projected growth rate of 16%. Loewenstine says MRVL reports that it expects to earn a $1.44 this year, and the stock is at $15.
“Marvell normally trades at 29 times trailing earnings. If we ignore that and we say what we think fair value is 15 times earnings, the stock offers 50% upside,” he said. “If you can buy a stock at one time its growth rate, and we think Marvell can grow at 15% to 16% a year, and I can buy that stock at 10 times earnings right now, I’ve got a great stock, and I’m going to make a lot of money.”
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