GDP growth rates and estimates have been ratcheted up and we expect the trend to continue, said Hank Smith, chief investment officer of Haverford Investments. He is bullish on U.S. stocks and offered his top stock plays.
“We’re bullish because fundamentals look good, the economy is expanding, and corporate profits are improving with 80 percent of S&P 500 companies reporting so far exceeding earnings estimates, and 70 percent exceeding sales estimates,” Smith told CNBC.
Smith said productivity increases have been “tremendous,” and the lower dollar is resulting in an improved trade balance.
“We are in a transition phase from cyclical companies to more predictable higher-quality companies that so far have, on a relative basis, underperformed,” he said.
Smith likes names in the consumer staples, health care and technology areas.
“We think the value right now is in large cap and large-cap quality,” he said.
“Particularly if we are going to have a below-average expansion, there is going to be a shift to those more predictable companies who can grow earnings, regardless of whether the economy is expanding at 2 percent or 4 percent.”
Johnson & Johnson
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Smith and his firm own shares of PG, JNJ, ABT and IBM.