Where To Invest For The Next 5 Years

With u.s. equities markets as volatile as ever, where do you go to find growth before the end of this decade? Our expert panelof money managers tells you what will be hot in 2010.

cyclicals make sense because of the resilience of consumers. We also like the finance sector, although it’s interest-rate sensitive. Finance companies across industries have better product diversification and are in a much better position than they were 10 years ago, so we think that sector has good long-term prospects. Utilities have always been sort of a staple, but deregulation concerns are diminishing, so we think it too has good long-term prospects.

Phelps: I think you have to be exposed to energy, no matter what. The demand is there and there is certainly a speculation premium in there. You want to be exposed, at least in the near term, to companies that have refining capabilities.

Invest in anything related to infrastructure and to emerging economies, like India and China. Growth is going to be there. They’re going to keep building buildings. A small fraction of Chinese people have cars; they haven’t scratched the surface of where that demand is going. And, ultimately, China is going to start exporting.

Also long term, I like selected healthcare, not big pharmaceuticals. Big pharma is literally going to buy biotech. Since they’re too big to grow, they will buy the smaller companies. Then there’s the aging population. Anything in healthcare systems, assisted living, things like that, is going to expand. Those are areas
that you definitely want to be exposed to.

Payne: There are some obvious industries. Energy is one. Home building is another. One thing about home builders is that there is not a lot of supply out there and the supply that is there is being hoarded and gobbled up. You could have 10 big home builders that have really dominated over the years, they have learned how to manipulate that whole thing. So long term I like industries with limited competition. Another industry, for instance, is railroads. There are four class-A railroads. You have an expanding economy. We’ve got growing exports from China. When they get here, the rails have to pick them up. So the rails are just an incredible opportunity.

I like the big financials. We’ve had a buy on Goldman Sachs, for instance. Same sort of deal. You’ve got a lot of consolidation in financials, and at the end of the day you only have a few key players who are pulling the strings.

As far as looking at individual companies long term, one thing we look at is quality companies where the top line is growing, where there is organic growth, ones that are not just acquiring that growth.

Phelps: Two things I’d like to add. One is the whole play on world hunger; Monsanto is the only real domestic story there. It’s going to address genetically modified food, which I think is going to play a big role down the road as we try to address this world hunger issue.

The other is wireless communications, which is still a growth area. Some of these emerging countries are not going to build lines and wires and poles like we did here. They are just taking cell

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