Give 2012 Time to Find Its Niche

Investors often take some time in January to decide where are they are valuing stocks, and which sectors they believe have potential, says asset manager Bryan Anderson. He’s proceeding with caution, and says he’s tracking companies with domestic-driven revenue streams.

Listen to the complete interview here.

Kate Stalter: I’m speaking with Bryan Anderson of Growth Equity Advisors.

Bryan, despite that being the name of your company, you said to me earlier that there may not be that much of interest right now when it does come to growth stocks. Tell us what you mean by that.

Bryan Anderson: Well, historically, January has been a very tricky month. There’s a lot of shifting going on by big institutions. We like to wait and let things settle down the first two or three weeks of the year before we try to identify growth leaders.

What we’ve seen pretty clearly and not shocking—those who are following the market know how much the prior growth leaders have come off. Ones like Netflix (NFLX) and OpenTable (OPEN) and some of those types of names had higher multiples, and yet there are names that remain intact, like Apple (AAPL) and a few others, especially in the biotech area.

So it’s a tricky period, and we just like to let things settle out for the first several weeks of the year before we get too involved.

Kate Stalter: Are you primarily looking at some of these larger-cap names—you just mentioned Apple—or are there mid-caps or small caps that you have on a watch list at this time?

Bryan Anderson: We try to cover the entire universe of size, and it just so happens now some of the larger growth names like the Apple and Google (GOOG) are doing better.

There’s been a real rotation since last summer away from a lot of the high-multiple growth names. Clearly the market has rotated towards larger cap, dividend-paying, steady. You can categorize them maybe as SP 100-type names.

I think that reflects a concern by investors just pulling in the horns, not being so aggressive and wanting, if they have to be involved—institutions have to be involved—they really are wanting stability and pristine stories, predictable revenue. They’re just not willing, at this time, to get involved in more of the faster growth, aggressive, more speculative-type names, generally speaking.

There are a few. One area that was quite strong last year, and which has come under a lot of pressure, are the cloud-computing names. Salesforce.com (CRM) has topped, VMWare (VMW) has topped. And then when Oracle (ORCL) announced their earnings, it really kind of cast a pall over that entire group.

So it’s somewhat indicative of where we are in the cycle now, I think. Many of the prior growth leaders have topped, a couple leading groups have topped, and really what you’re left with are just a handful of those which are larger-cap, lower-multiple growth names.

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