Should You Invest in Housing

I think housing has turned around,said Rebecca Patterson,Managing Director and Chief Investment Officer at Bessemer Trust.There's a slow improvement in consumer wealth.
We're being very selective on the financials that we own right now.We're gonna be judicious in what we own.It's definitely less than what we had in the past.
We don't want to get over-excited about housing.There's a good trend to play there,but it's not easy money,Ms.Patterson cautioned.
Consider the homebuilders;home improvement firms;financials;and mortgage-backed securities,or MBS.MBS can have structural flow support longer than was expected.
Rebecca Patterson has an MBA from New York University;an MA in International Economics from the Johns Hopkins University School of Advanced International Studies;and a BS in Journalism from the University of Florida.She had been a journalist covering economics and financials for the Associated Press and Dow Jones,parent company of The Wall Street Journal.
KB Home(KBH),Toll Brothers(TOL)

Advantage View:Where the Opportunity Is

Earnings have been very healthy on the back of cost-cutting,according to Steve Barry,co-chief investment officer at Goldman Sachs Asset Management.We see a market with stocks reacting individually.There's only so much you can do on the cost side.You've got to get some revenue growth.
I think you have to look beyond our borders.The U.S. is maybe half to a little more of our company's global results.The middle class of the emerging markets can help drive growth globally.
We see an improvement on the credit side of financials.We're in a world where investors want confirmation,rather than what may happen.Financials look to us to be very opportunistic here.That anticipatory dynamic is core to what we do.Financials are enterprises that behave and adapt,Mr.Barry believes.
Bob Albertson,a principal and chief strategist at Sandler O'Neill Partners,L.P., also likes the financials.He would go into banking.You're seeing accelerating signs of loan growth to businesses.It's a magnetic attraction to see that.The financial sector hasn't participated in the rally.
At the end of the day,credit demand is picking up.The excess capital is overflowing,and the banks don't know what to do with it,Mr.Albertson points out.
Goldman Sachs(GS),iShares Dow Jones U.S. Financial Sector Index Fund(IYF),iShares S&P Global Financials Sector Index Fund(IXG)

Bryn Mawr Trust:Momentum Takes Hold

Since September,equities have been steadily regaining strength.Bryn Mawr Trust thinks the market is the ultimate leading indicator.It's gonna be tough to break this momentum for a while.Earnings will surprise on the upside.Positive growth in economically sensitive companies,as well as profit,will occur.
The Dow Jones Industrial Average has crossed the 11,000 mark for the first time since May.If we continue to look at an up market 12-18 months from now,the financials are gonna participate in that.
For sure,there's gonna be a reversion to the mean.As inflation picks up,stocks will outperform bonds again.
Eric Thorne is Vice President and Senior Portfolio Manager at Bryn Mawr Trust.The full service bank with a specialty in affluent clients was founded in 1889,and has branches in the Philadelphia area.
Bryn Mawr Bank Corporation(BMTC)

Deutsche Bank Recommendations

We hit the trough in Q3 of 2009,says Binky Chada,Chief U.S. Equity Strategist at Deutsche Bank.A large mountain of cash has already built up on corporate balance sheets.For Deutsche Bank,the bottom line is:1.buybacks;2.capital expenditure;and 3.dividends.Almost all of the decline in S&P dividends is from the financials.Over the next few years,DB expects to see the financials pay out.They have the cash.It's very important for regulators to get their arms around the issue.
DB recommends a basket of 50 stocks that cuts across the sectors.They have buys on Rowan,Dupont,Genworth,Molson and Schwab.The arguments for the historical patterns are,if anything,strengthened,in Binky Chada's view.
As for the financials paying out,consider that,once the U.S. Treasury sells its shares of Citigroup,the firm will be free to reinstitute its dividend.The shares are to be sold quietly,over a number of months,so as not to disrupt the market.Citigroup has already repaid its government loan.

A TCW Assessment

Scepticism about the permanence of recent market gains abounds.Strategist Komal Sri Kumar of TCW doesn't believe the fundamentals are there.Banks are not lending,and unemployment is high.There is still quite a bit of downside coming.This is not a market for the common person to buy and hold,in Mr.Kumar's view.
The fact that the earnings are coming from financials is negative for the overall economy.They are from proprietary trading,not commercial lending.The flow of funds data show that loans are being written off;borrowers are not paying them,Mr.Kumar observed.
Indeed,a lot of the market's upswing is attributable to the performance of only one financial stock-namely,Citigroup.Citi will report its earnings next month,a moment of vulnerablity for equities based on what we have seen so far.

Fundamentals,Not Speculation

John Calamos,Sr.,founder of Calamos Investments,thinks that we're in a very volatile period.If you sit on the sidelines,you end up missing a lot of opportunities-such as in the global markets.Investors need to think more globally now than ever before.The fundamentals of growth stocks are very favorable.
Calamos is looking at some of the consumer product tech firms.The fundamentals of Apple are what make it attractive.We're entering a slow growth market phase that will favor active managers.We're favoring the tech and energy sectors for the road ahead.The commodity and energy plays are hedges against the dollar being devalued.
Financials are more of a speculative trading play,rather than fundamentals,Mr.Calamos said.It's more a hope,a speculation that things will get better.I'd rather own cheap growth stocks,the thirty-plus year veteran of asset management stated.Calamos Investments,located in Naperville,Illinois,offers a suite of diversified portfolios designed to help clients reach a wide range of investment goals.