Meet a friend of Wall Street's hated bull market

by Adam Shell, USA TODAY
Originally published 9:32 p.m. EDT September 14, 2016

Thorne Perkin, president of Papamarkou Wellner Asset Management, can’t understand why most investors don't like the Wall Street bull and keep dissing it all the time.

“This bull is universally loathed, and has been hated for years, and I can’t figure out why,” says Perkin, whose firm manages $3.5 billion for high net worth investors around the globe.

Not even declines three of the past four days, two of which were sizable sell-offs, could change his positive view. Asked if the recent bout of market volatility made him rethink his call to hold an above-average helping of stocks in his client portfolios, he shot back, "No. Volatility doesn't surprise us. We will have more of it."

The fact is this bull, which is still within 3% of its record high despite the recent decline, has made a lot of money for investors in the past 7½ years — tripling in value and posting a 224% gain. But a chorus of doubters still warns of trouble ahead for the resilient and disrespected bull market, which they say is overvalued and propped up by unprecedented stimulus from central banks.

Wall Street heavy-hitters such as billionaire investor Carl Icahn, are warning of trouble ahead. “You look at the environment, and I think it is very dangerous,” he said Tuesday at an investment conference sponsored by CNBC and Institutional Investor. At the same event, Stephen Schwarzman, CEO of private equity firm Blackstone, said the stock market has gotten a pop from low interest rates and is “a little expensive for his taste.” Hedge fund honcho Ray Dalio of Bridgewater Associates warned that central bank stimulus is losing its effectiveness, putting the debt market in a “dangerous situation.”

Amid the pessimism, Perkin is a confident, unabashed bull, one who sees opportunity in stocks where others see risk and regularly spin a bearish storyline of a financial world on the cusp of falling apart. Perkin, in contrast, is a true believer in the longer-term health of the market with a healthy contrarian streak, an anti-pessimist who is now promoting what he says will be a winning investment theme of “U.S. pre-eminence.”

There’s simply too much pessimism masking what’s good in today’s equity market, Perkin says. The lack of irrational exuberance, he says, is actually a good thing.

Perkin ticks off all the things market doubters are scared of: “The bears say, ‘The Fed is going to raise rates. The market’s expensive. We have all these geopolitical concerns. What will happen if Trump gets in? Is the world going to end?’ All the focus is on negativity and things to worry about.”

Perkin sees the financial world much differently and thinks his optimistic view will win out and be more profitable for investors than the doom-and-gloom picture painted by pessimists.

“The world is not ending,” Perkin says, adding the market positives are being drowned out by a story of fear, such as fear of rising interest rates. “We disagree with the negative tone we continually hear and believe there’s an opportunity for a contrarian story with a positive bent on the markets and see attractive investment opportunities in U.S. stocks.”

While most investors worry about the Brexit fallout, immigration issues, an ugly presidential election, domestic terrorism and ISIS, Perkin stresses that those and other world problems “do not undermine our thesis of U.S. pre-eminence.”

While he says there’s always a chance for a 5% to 10% market drop (a too-early Fed hike could spark such a decline, as could some other exogenous shock), he says investors should take advantage of fear in the market and buy when prices dip lower.

He still is recommending his wealthy clients with longer-term investment horizons and the ability to stomach any pullbacks today put 50% to 55% of their assets in individual stocks. And when you add in the equity exposure his clients get from alternative investments such as hedge funds, clients' stock exposure rises to roughly 70% to 75%, which he says he’s comfortable with.

Buy brand-name U.S. blue chip stocks with staying power, he says. Perkin likes Google, Amazon, Visa, JP Morgan Chase, Exxon-Mobil and Pfizer. “These are top blue-chip companies with strong market share, great earnings profiles and which pay high dividends. These are names we like for the long haul.”

Perkin says it makes no sense to invest in bonds, given the benchmark 10-year Treasury yields 1.7%, which is less than the yields now paid by many blue chip stocks. "It just doesn't pay to own bonds," he says.

Other reasons why Perkin favors stocks: Corporate earnings season ended up better than feared, and any hint of a rebound in earnings growth will get stock investors excited. He doesn’t see the Fed hiking interest rates until after the November election and expects the central bank to remain very accommodative. Similar “dovish” reactions from central bankers around the globe “will keep interest rates low … making for a friendlier business environment."

There’s also plenty of cash still sitting on the sidelines seeking “opportunities,” he adds.

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Pubdate: 
Wednesday, September 14, 2016