If you aren't scared by what's been happening in the stock market lately, you haven't been paying attention.
The broad market is down more than 20% year to date, and the economic picture remains bleak. Inflation is rearing its ugly head, and the turmoil in the financial sector shows little sign of abating.
Investors are adopting the cut-and-run approach and fleeing the stock market in droves. And it looks like the professionals may be joining them.
A negative outlook
Money managers are more pessimistic than they've been in a decade. According to the Merrill Lynch Fund Manager Survey, "Asset allocators have taken their most negative stance toward equities in a decade, with a net 27 percent underweight the asset class in June." Managers are reportedly pulling money out of both stocks and bonds -- and putting it into cash.
If even the investment professionals are abandoning equities, shouldn't you?
Not so fast.
Going against the grain
At least one proven fund manager is putting his money to work in today's uncertain environment -- Ken Heebner of CGM Focus (CGMFX). In a recent interview with The Globe, Heebner stated, "My view is we've probably seen the weakest period of economic activity. The economy may not be robust in the next year, but it's seen its low point and at some point will move higher."
We couldn't agree more. Heebner understands that if you sell out now, you lock in your losses -- and lose any chance of cashing in on a rebound. While no one knows exactly when it will happen, odds are the stock market will eventually recover -- and it's in that recovery that the greatest returns will be made. If you wait to invest until things get better, you'll have already missed a lot of the upside.
Instead of running away from equities, in recent months Heebner has been picking up some select names that he thinks have excellent long-term growth prospects. Recent purchases include several industrial stocks like Alcoa (NYSE: AA ) , Southern Copper Corporation (NYSE: PCU ) , Agnico-Eagle Mines (NYSE: AEM ) , and AK Steel Holding (NYSE: AKS ) . He's also picked up some blue-chip names like IBM (NYSE: IBM ) , General Electric (NYSE: GE ) , and Hewlett-Packard (NYSE: HPQ ) .
Although it seems counterintuitive, bear markets are one of the best times to buy stocks. Prices have been slashed across the board, and many strong companies are selling for a fraction of what they were a year or two ago.
This is something Ken Heebner takes to heart. He's made his fortune as a contrarian, diving in when no one else dares, and he's got the track record to prove he's been right more often than not.
And I'm willing to bet he'll make a boatload by putting his cash to work in today's market.
The Foolish bottom line
Although some fund managers are pulling back from the market right now, the best ones, like Ken Heebner, know that markets like this help to secure strong returns for the future -- and they're buying. Follow their lead, and use this time to position your portfolio for tomorrow's gains.
If you'd like to put your dollars to work with the best fund managers, join our Champion Funds investment service. At Champion Funds, we research mutual funds to find the ones whose management and fees are working for you.
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Amanda Kish heads up the Fool's Champion Funds investment service. At the time of publication, she did not own any of the companies mentioned herein. CGM Focus is a Champion Funds selection. Click here to find out more about the Fool's disclosure policy.