Be Selective, Buy Strong Dividend Payers: Pimco’s Kashkari
The outlook for the market may appear to be improving, but the problems that scared investors out of stocks have not gone away, warned Neel Kashkari, head of global equities at bond fund Pimco.
“While we’re breathing a sigh of relief from Europe…we don’t think those long-term risks have really been solved. They’ve just been delayed,” he told CNBC Monday.
One of those storm clouds: Greece. Kashkari doesn’t believe it is going to be able to implement the austerity programs promised as part of its debt restructuringand might need yet another bailout. Portugal would be “next in line,” he added.
Back in the U.S., Kashkari, like Pimco founder Bill Gross, expects another round of quantitative easingfrom the Federal Reserve and sees interest rates remaining low until the end of 2014.
“Markets are swinging, sentiment is swinging. People can’t see any clouds on the horizon,” Kashkari said. “A few months ago, it seemed the world was going to end. We’re more in the middle, which is muddle-through, continued very slow growth” and U.S. gross domestic product of 2 percent. “So the Fed’s going to have to be active.”
What can an investor do?
“We’re finding individual companies that we do like all around the world, in America, in emerging markets,” said Kashkari, who did not name them.
“We’re being very selective,” looking for companies at attractive prices that are dividend payers and have strong balance sheets, he said, because “we still see a lot of downside risk. All the risk have not been taken off the table yet.”
The Pimco executive said Apple’s move to offer a dividend and buy back shares makes the company more attractive to him because “we definitely like dividend-paying stocks and companies committed to growing their dividend over time.”
Kashkari said he will be waiting to see how committed Apple is to growing the dividend.
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Disclosure information was not available for Neel Kashkari or his company.