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Get Out of Stocks and Into Bonds: Portfolio Manager

Wednesday, 5 May 2010 | 1:16 PM ET

Stocks opened lower on Wednesday, following a selloff in the prior session, as Moody's put Portugal's debt rating on review. Barry James, president of James Advantage Funds and Neil Hennessy, portfolio manager and chief investment officer at Hennessy Funds shared their insights.

Market Edge
Barry James, of the James Advantage Funds, and Neil Hennessy, of the Hennessy Funds, share their investment strategies and stock picks.

“The market’s been in a topping phase since January and there’s still way too much bullishness in the market—36 percent more bulls than bears,” James told CNBC.

“We’ve been lowering equity levels over the last couple of months and we’re trying to find ways to protect capital right now, instead of looking to deploy it.”

James recommended that investors look into high-quality bonds.

“No one likes bonds—it’s a temporary move—but as we see the marketplace right now, the real concern is that the economy is not having a robust rebound,” he explained. “We’re going to see a lower market, which will provide a good buying opportunity. But for now, the act of courage is to get out of stocks and into bonds.”

Only 'Small-Term' Pullback?

In the meantime, Hennessy said this is just a “small-term correction” and while investors are in panic mode, the Dow will still close higher around 11,800 by year-end.

“People are scared and they don’t want to go back to what we saw a year ago, so they’re taking their money out of markets and putting it in fixed income—which is clearly not the place to be—but that’s what’s happening,” he said.

“As ugly as what’s happening in Europe is, companies are still so very strong and lean in America that their profits are still going to continue. And I think that dividend is still going to be the play that’s going to move the markets higher,” he continued.

Scorecard: What They Said Last Time...

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More Market Point/Counterpoint:

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CNBC Data Pages:

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CNBC Slideshows:

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Wednesday's Dow Laggards (as of this writing):

Walt Disney

Du Pont

Merck

Bank of America

Caterpillar

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Disclosures:

No immediate information was available for Hennessy or James.

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Disclaimer

  Price   Change %Change
BAC
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CAT
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DD
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DIS
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MRK
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