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Time to Take Profits and Run? Strategists Debate

With the Standard & Poor’s 500 indexposting its best February since 1998 and the Nasdaq Composite Index crossing 3,000 for the first time since 2000, is now the time to take profits and run before a possible correction? Two strategists shared their thoughts with CNBC on Thursday.

Barbie at Fashion Week 2012
Photo By: Katie Little for CNBC.com
Barbie at Fashion Week 2012

“The run-up that we’ve seen, I think, has been driven by fundamentals, but it might be prudent to start trimming some of your profits and reinvesting in your losers,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, told CNBC.

At around $1,375, the S&P 500 has been trading toward the top of what Jacobsen would consider his trading range — a level with a lot of technical resistance, he said.

Jacobsen detailed some of his favorite sectors right now and recommended that investors look at stocks that may have been lagging.

“Technology is a great area to be looking at,” he said. “Energy is also another area. Health care is one of the areas that we’ve been fairly bullish on, which unfortunately it has been one of the laggards. But that might be one of the areas to be looking to add to as opposed to just running away from.”

But Sandy Lincoln, chief market strategist for BMO Asset Management, cautioned against taking profits and getting out.

Lincoln said in the same interview that the market is likely to experience a correction, an event that would be in line with historical trading patterns. During the last 40 or 50 years, he said that about 90 percent to 95 percent of the time there has been an up year in the market there has also been an intra-year correction.

“We think profits will be nice for the end of the year as well, but we just think there will be some likely correction,” Lincoln said. “You want to be ready with good companies to step in and buy those companies that are executing well.”

Lincoln listed United Rentals and Mattel as two companies that would be good for investors to buy during a pullback.

He said United Rentals , which dominates the U.S. equipment leasing business, has strong pricing along with increasing participation and utilitization rates.

Lincoln’s other stock pick was Mattel , which he said has done a good job of managing margins and has reasonable valuation.

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Disclosures:

Disclosure information was not available for Brian Jacobsen, Sandy Lincoln or their companies.

Disclaimer

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