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Unemployment May Hit 16%: Portfolio Manager

Wednesday, 2 Sep 2009 | 11:37 AM ET

Stocks have been on a decline in the last few trading sessions, making investors nervous about where to put their money. Dan Veru, executive vice president and co-CIO of Palisade Capital Management and John Lekas, CEO and portfolio manager at Leader Capital shared their market insights.

Lekas advised investors to stay cautious on the markets and said the economy is on shaky grounds which will put more pressure on companies’ topline growth.

September Stock Picks
The tortoise wins the race in this market, John Lekas, of Leader Capital, told CNBC. He and Dan Veru, of Palisade Capital Management, share their investment strategies and favorite stock picks.

“The productivity numbers that have been positive are really the result of artificial stimulus,” Lekas told CNBC. “The organic growth in corporate America is in the negative and what you have is rising cost of capital. We have 70 percent of corporate, municipal and consumer paper and the Fed trying to raise $2 trillion coming due in the next 3 to 4 years and there’s not enough money to go around.”

Lekas expects the unemployment rate to hit 16 percent as more companies consolidate and the equity markets will break their lows by the end of October and will go back the historic March 9 lows.

“You just fell off a 20-story building and you’re at floor 5,” he said. “Everything’s ok so far, but in the end, you’re just a little bit early.”

In the meantime, Veru said individual stock selection is the way to go.

“It’s ridiculous to say that all equities are bad,” said Veru. “You learn a lot more about companies through a bear market than through a bull market.”

“Companies that react to a changing economic environment with strong balance sheets and the ability to generate cash flow through this difficult environment are where we’re placing out bets,” he said.

Veru Recommends:

Genesee & Wyoming Railroad

Coach

Cognizant

Lekas Recommends:

Conservative fixed income

Short the bond market — "Avoid interest rate risks which could get volatile as a lot more paper is issued," said Lekas.

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Disclosure:

Veru’s firm owns shares of GWR.

No immediate information was available for Lekas or his firm.

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CNBC Slideshows:

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