Dan Chung, CEO and chief investment officer of Fred Alger Management (whose Alger Funds as a whole have significantly outperformed the broader market for the past three and five years) says upside earning surprises, poor yields on cash, and the international nature of many companies will spur the stock market higher.
“We’ll see more fundamental upside [earnings] surprises in the third and fourth quarters, and the wall of cash on the sidelines” that’s fetching “terrible” yields will eventually bring more investors back to the market, Chung tells Barron’s. “A 5% reallocation from cash and short-term bonds could drive a 17% appreciation in the stock market,” he contends.
Chung also says we’ve reached “the tipping point where international business at many companies can drive growth and actually overcome weakness in the U.S.”
While Chung thinks earnings will grow by 25% in 2010, he says that it’s a stock-picker’s market that could be range-bound. Potential headwinds — the end to easy year-over-year earnings comparisons and the winding down of the stimulus funding — could pop up in the second half of 2010. But Chung adds that “investors will make money from here.”
Currently, Chung is particularly high on the personal computer industry, and on chip makers that benefit from increasing wireless connectivity, Barron’s reports.