Saturday, October 3, 2009

Steve Leuthold of Leuthold Core Investment (LCORX) Mutual Fund Remains a Roaring Bull - S&P to 1200 in 2009, 1350 in 2010

Steve Leuthold correctly turned bullish at an opportune time and sees no reason to change tune at least through mid 2010. His Leuthold Core Investment Fund (LCORX) is having a good year at +20% year to date, and unlike many mutual funds nowadays he actually has positive 3 year (+4%) and 5 year (+7%) returns.

Again, one of the few in the mutual fund world who does not see cash as trash, and instead as a viable investment vehicle - Leuthold is another of the "go anywhere" types that does not fit into a Morningstar box. In his top 10 positions are exposure to Brazil, China, high yield junk bonds, and gold. I love his core philosophy...

The Leuthold Core Investment Fund differs from most other mutual funds by investing in stocks, bonds, money market instruments and certain foreign securities. When appropriate, as disciplines dictate, the Core Fund may also hedge its market exposure. We adjust the proportion of each asset class to reflect our view of the potential opportunity and value offered within that sector, as well as the potential risk. Although there are no guarantees, it is our belief that successful investing demands skill both in making money and attempting to preserve any gains.

The investment guidelines of the Leuthold Core Investment Fund follow a 30%-70% Equity Exposure and 30% - 70% Fixed Income Exposure. Under extreme market conditions, there may be a departure from the basic core guidelines.

Via Bloomberg
  • Steve Leuthold, whose Leuthold Core Investment Fund has beaten 95 percent of its rivals in the past five years, said the Standard & Poor’s 500 Index will jump to 1,350 next year as the economy recovers from the worst contraction since the Great Depression.
  • The 71-year-old investor, who turned bullish after his Grizzly Short Fund returned 74 percent because of the equity market rout in 2008, predicts that the stock index will end 2009 at 1,200.
  • “There’s pretty good momentum, and the market psychology is right,” Leuthold, who manages $4 billion, said in a telephone interview from Minneapolis yesterday. “The markets turned up before the economy did. Now, the economy is improving. It might be a little better than most think. It ain’t wonderful, but it’s a lot better than it was.”
  • “I’m really not too concerned about a minor move (correction) like this,” said Leuthold, who has 72 percent of his fund in stocks. “It’s premature to take any defensive action.”
  • Leuthold said that 25 percent of his equity fund is in technology stocks, while 12 percent is in small- and mid-sized biotechnology companies.
  • “We think there’s going to be a lot more activity in terms of acquisitions,” he said. “The large tech companies are loaded with cash and willing to diversify in other areas.” (I agree with that point, the Fed has made money nearly free again - why not use it to scoop up anything you want)
  • Leuthold has 8 percent of his portfolio in foreign banks, and he’s evaluating financial institutions in Europe and Asia. “Not one of them is an American bank,” he said. “We don’t have American regional banks because our concern is that they seem to be maybe overexposed to commercial real estate, where you maybe have a second shoe to fall.”
What after summer 2010?
  • Leuthold isn’t convinced stocks will keep rallying in the second half of 2010. “Valuations would be getting richer at that point,” he said. “We’re not going to make a new high above 1,550 or anything like that. There’s got to be more work done. And the U.S. is a lagging global economy now.”
  • He says it may take as long as five years before the S&P 500 exceeds its October 2007 record of 1,565.15, and 30 percent of his equity portfolio is allocated to non-U.S. companies on a bet that economic growth rates will be higher abroad.

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