I caught Rich Bernstein’s presentation at a conference last month and was very impressed. He went through the basics on how almost no one believes in a bull market for the first several years and then he talked about his favorite way to play this one. He believes in the US manufacturing renaissance theme and prefers US-focused small and midcaps to the mega-cap multi-nationals or emerging market stocks that everyone os so enamored of.
Here’s what he told the Financial Times yesterday:
Profits data increasingly refute the widely held belief that the emerging markets offer the best growth. Approximately 60 per cent of EM companies reported negative earnings surprises for the fourth quarter of 2012. The comparable figure in the US was only 27 per cent. Earnings expectations for EM companies seem much too optimistic.
In addition, the projected earnings-per-share growth rate for US small-cap stocks is double that for EM stocks. Based on data from Bloomberg, the projected 12-month EPS growth rate for the S&P Small Cap 600 is 34 per cent, whereas the comparable number for the MSCI Emerging Markets universe is only 17 per cent. US domestic stocks currently offer better growth and are certainly under-owned.
Be sure to read the whole thing.