In the last month, high risk stocks have continued to outperform most of their peers, continuing a trend since the market low of this year. These mostly cyclical or highly leveraged companies were killed in 2008 and had a lot of ground to recover. Yet one wonders how much longer this can continue.
In their latest Global Equity Strategy report, Credit Suisse believes that large cap, quality growth companies will lead the charge going forward as the high risk rally might have run its course. It’s actually a moderately defensive stance given that they believe high risk companies may have priced-in over optimistics recovery expectations while large cap growth remain undervalued.
What’s also nice about being in quality right now is that should the current rally lose steam, stronger companies are likely to fall less than the High Risk names.
(Via Credit Suisse, “Global Equity Strategy”, 21 August 2009. High Risk based on beta, analyst estimate dispersion, and dividend cover. Good Value based on PE, dividend yield, and price to net asset value, Quality Growth based on earnings growth and and high asset turnover)
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