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Focus on 'Consistent' Companies for Profit: Strategist

Wednesday, 26 Aug 2009 | 3:24 PM ET

With stocks at 10-month highs, some Wall Street observers are expecting a correction. Bill Smead, CEO and CIO of Smead Capital Management shared his market insights and investment advice.

Market Bull vs. Bear
With stocks at 10-month highs, some Wall Street observers are expecting a correction. Bill Smead, of Smead Capital Management, and Vinny Catalan, of Blue Marble Research, share their insight.

“What we see right now is a transition period from the enormous surge in economically sensitive things to investors going back to what they should care about, which is how long is a franchise going to last, how well is the company going to do for the next 3 to 5 years," Smead told CNBC.

"And," he added,"put on appropriate price/earnings ratios based on quality and based on duration.”

Investment Advice:

Smead said investors have gotten excited about the economically sensitive companies and they have neglected the ones that are consistent, such as Wal-Mart, Merck, AT&T and McDonald's.

“You should be bullish on the ones that are going to be consistent and they make up significant portions of the indicies,” he said.

“For example, the Dow might outperform the S&P for the next couple of years, because it’s more made up with higher quality companies that have been neglected while people chase economic sensitivity.”

Market Intelligence:

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Disclosure:

No immediate information was available for Smead or his firm.

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CNBC Slideshows:

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Disclaimer

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