The stock market is on track to post returns of up to 10 percent next year, BlackRock Chief Investment Officer of U.S. Fundamental Equity Chris Leavy said Friday on CNBC.
While the remainder of the year appears likely to trade sideways, he said on “Fast Money” that 2013 holds upside potential.
“There’s two reasons. Cash returning to shareholders is about 5 percent — 2 percent dividend yield, 3 percent what we call the buy-back yield — so before you grow earnings, you’re already at a 5 percent return,” he said. “And then we think underlying operating earnings grow in line with nominal GDP, which’ll be around 4 to 5 percent. So if you combine those two things, you’re looking at a 9 to 10 percent return for equities next year.”
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Leavy’s price target for the S&P 500 was 1,450 for year-end and 1,520 for 2013.
Among Leavy’s top sectors are financials and technology.
“We pinpoint the money centers, not so much the regionals,” he said, adding that “a lot of upside remains in Citigroup.”
Google was his top tech name, with the stock priced at 13½ times forward earnings, excluding cash.
“Apple is a name we like, but our favorite in the group is Google,” he said.
Trader disclosure: On Sept. 28, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by the “Fast Money” traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Mike Murphy is out APLE; Mike Murphy is long WFC; Mike Murphy is long TGT; Mike Murphy is long LEN; Mike Murphy is short GPS; Jon Najarian is long call spreads in AAPL; Jon Najarian is long call spreads in JPM; Jon Najarian is long call spreads in SBUX; Jon Najarian is long call spreads in FB; Jon Najarian is long call spreads in AMZN; Jon Najarian is long call spreads in GOOG; Jon Najarian is long call spreads in CAN; Jon Najarian is long call spreads in TJX; Jon Najarian is long GLUU; Jon Najarian is long STSI; Jon Najarian is long CME; Jon Najarian is long CBOE; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long JPM CALLS; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT.
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