Ken Fisher Has 2 Words for You

Investment professionals are somewhat divided in their market outlooks. There are those like Bill Gross, Pimco's fixed income maestro, who believe we're entering a "new-normal" era of prolonged lackluster performance. Then there's Ken Fisher, who's telling investors that the idea of a new normal is garbage just as plainly as he tells investors: "Be bullish."

Fisher has 37 years of investment industry experience, having founded the well-known money management firm that bears his name. He's known for challenging conventional wisdom both in his investing and the way he runs his business, recently sharing the Tiburon CEO Summit Award with discount-brokerage pioneer Charles Schwab. And like Bill Miller, he's bullish on stocks; in his words, "While obviously far from March's lows, stocks (globally) are still very cheap by historical standards."

Doing the bull dance, feeling the flow
Fisher says we're still in the early stages of a bull rally, and that the stock market is simply doing what it has always done after a major pullback: springing forcefully forward. All year, Fisher has been telling investors: "Big bear markets are almost always followed by big bull markets in a V-shape pattern. The steeper the decent, the steeper the ascent."

The sectors that fall with the most force, he claims, bounce back the most. Fisher says: "Skip the biggest U.S. banks. Focus instead on materials, industrials and technology. More important, invest heavily overseas, where opportunities are the best."

Consumer discretionary strength
Fisher has also observed over the years that the sectors that perform well in the first half of a bear market -- and underperform in the back half -- usually lead in the first half of a bull market rally. For example, take a look at the following table comparing the respective performances of the S&P 500, Disney (NYSE: DIS  ) , and DuPont (NYSE: DD  ) going back to the beginning of the most recent bear market.

Dates

S&P 500

Disney

DuPont

10/9/07 through 10/2/08

(29%)

(15%)

(19%)

10/2/08 through 3/9/09

(39%)

(47%)

(57%)

3/9/09 through 11/30/09

62%

94%

123%

Source: Yahoo! Finance.

You can see that the behavior of Disney's and DuPont's stock prices supports Fisher's argument. Fisher says that the same pattern repeats itself throughout the materials, industrials, technology, and consumer discretionary sectors, but that right now, it's the consumer discretionaries that have the most potential for further price appreciation.

One such stock that Fisher has been touting lately is toymaker Hasbro (NYSE: HAS  ) , which he suggests as a play on the baby boomers' desire to be remembered as generous grandparents. In a recent Bloomberg interview, Fisher elaborates: "I believe that this is classic consumer discretionary at a time consumer discretionary should be strong." He also argues that baby boomers are more inclined to purchase Hasbro's toys for their own broods because many of them -- like Play-Doh, Nerf, and Tonka -- are toys that members of that generation enjoyed during their own childhoods.

What else is on the table?
You won't have to dig very far to find Fisher's recommendations; he's one of the more outspoken investment professionals around. Recently, he's hailed Spanish energy syndicate Respol (NYSE: REP  ) as a company with everything an investor wants. It has some potential for growth, pays a big dividend, and sports a fairly cheap forward P/E ratio around 11. With its tentacles throughout Latin America, Repsol has the "quality of an emerging markets stock" according to Fisher.

Fisher also likes the South American petrochemical giant, Braskem. He says it's still a buy, arguing that, "In this hemisphere only Dow Chemical (NYSE: DOW  ) and ExxonMobil (NYSE: XOM  ) are larger." On the other side of the world in Australia, Alumina is another global play that Fisher recommends. It has a 40% stake in Alcoa's (NYSE: AA  ) World Alumina & Chemicals subsidiary, which makes it one of the world's lowest-cost aluminum ore producers.

Not so new normal
Finally, Fisher has one final response to Bill Gross and other new normal believers: Consider the source. He notes that Pimco "is getting into the equity business right now. Watch what its managers do, not what they say." In a bull market, interest rates are likely to rise, and fixed-income investors will have a tough time making profits. If Fisher's predictions about the stock market are right, it's easy to understand why even the company running the biggest bond fund in the world might want to get in on some of the action in stocks.

What do you think about Fisher's optimism? Do you agree with the new normal sentiment? Are you buying global equities? Let us know what you think in the comments section below.

Fool contributor Chris Jones owns no shares of any company mentioned in this article. Disney, Hasbro, and Schwab are Motley Fool Stock Advisor picks. Disney is a Motley Fool Inside Value recommendation. The Fool owns shares of Hasbro. The Motley Fool's disclosure policy passed the third grade. Oh what a glorious day!


Read/Post Comments (7) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 01, 2009, at 4:27 PM, funfundvierzig wrote:

    DuPont has two words for you and any long-term investor:

    DECISIVELY DOWN!

    The long-term trend of this past-prime chemical conglomerate has been down, Down, DOWN for a decade.

    Fact to remember: The average annual total return for DuPont's sick shares for the ten year period ending Oct. 30, 2009 has been MINUS 3.45!

    ...funfun..

  • Report this Comment On December 02, 2009, at 3:28 AM, Funfunchaser wrote:

    I hear crickets on this board.......

  • Report this Comment On December 04, 2009, at 11:09 AM, Jonesicus wrote:

    Right, but DuPont wasn't included in the article as a recommendation -- it was merely there to illustrate the observation that materials stocks (and industrials and technology) rallied big during the first part of the bull market. Fisher says that those gains have mostly been realized, but there's still room for appreciation in Consumer Discretionary stocks, which are what he's recommending.

    Chris

  • Report this Comment On January 02, 2010, at 5:55 PM, Fool wrote:

    "He is known for challenging conventional wisdom".hE IS KNOWN AS WELL FOR HAVING LOST HIS CLIENTS A FORTUNE IN THE LAST BEAR MARKET BY STUPIDLY DENYING THE CREDIT CRUNCH. So yes he is a maverick, but not a very clever one and I want to warn people to be very careful before following Fisher's advise and to be even more careful before givin him their money to manage.Fisher is everywhere in order to convince people to give him their money to manage.During the bull market his funds performences were not impressive at all, during the bear market,they were a disaster.

  • Report this Comment On January 04, 2010, at 11:27 PM, FrankG45 wrote:

    First, saying someone “stupidly” did anything and using all caps is hardly the respectful discourse one normally finds on this website. Second, Ken Fisher has clearly been spot on in his predictions for this year, which is what this article is about. And, from what I can see, his long term record does beat the S&P 500. That’s a matter of public record. I can’t imagine what motive someone would have to come on a Fool board and make unsubstantiated personal attacks against the subject of an article here. Also, if someone is going to focus on just one year, why not focus on the one just past? People who were bearish this year were just wrong because the S&P was up 28% or so and foreign stocks more. So, Ken Fisher was clearly right about that.

    Fisher missed the 2008 bear market but so did a lot of people. I don’t call that “stupid.” Warren Buffett is a very smart guy and he’s made mistakes and gotten a few years wrong. Really wrong. Berkshire Hathaway was up less than 3% this year. And in 1999, BH was down 20% when the S&P was up 20%. He was behind 40% in just one year. If you think Fisher is terrible, then you have to think Buffett is a super disaster. But I think everyone here agrees Warren Buffett is very smart and not a disaster. He just had a few years he got wrong. Happens to the best of them.

    Anyway, Fool’s boards are a place for reasoned discourse, which is one reason why this web site is usually a cut above the rest. Unsubstantiated personal attacks and axe grinding you can do on your own blog. I’d be sad to see these boards turn into meaningless shouting matches you get elsewhere.

  • Report this Comment On March 28, 2013, at 3:39 PM, payote wrote:

    Sorry Frank but if I used the word stupidly it is because Fisher, not only missed the 2008 bear, but he was himself implying that the economists who were warning of the dangers did not understand what was going on. Fisher remained 100% in equities until the end while his staff were boasting of his ability to read bear markets. The difference between Fisher and Buffet is that the later do not lecture. Read the 2008 Fisher Forbes columns when Fisher was saying "Some called me an idiot", he was so full of himself leaving vulnerable OAP

  • Report this Comment On March 28, 2013, at 9:16 PM, payote wrote:

    leaving vulnerable OAP who needed the monies for their retirement hugely exposed while telling them at the same time that he had a high ability to read and to take appropriate actions in bear markets.

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