Steve Kuhn, fixed-income trading head at $14.8 billion Pine River Capital Management LP, said investors should sell their bonds and buy “boring” stocks including packaging manufacturer Rock-Tenn Co. (RKT)
“There are companies out there that are incredibly boring and I just think this is a great time to replace Treasury holdings with these boring stocks,” he said at the SkyBridge Alternatives Conference in Las Vegas today.
Kuhn, whose firm is based in Minnetonka, Minnesota, said stocks he liked included foodmaker ConAgra Foods Inc. because of its stable cash flows and AGCO Corp. (AGCO), a maker of agricultural equipment. Kuhn said the company’s earnings are stable and “trending higher.”
Kuhn’s comments were echoed by Leon Cooperman, chief executive officer of Omega Advisors Inc., who said he expects the Standard & Poor’s 500 Index to end the year around 2,000, an increase of about 7 percent from current levels. Owning government bonds doesn’t make much sense, Cooperman said.
U.S. equities reached all-time highs this week after three rounds of monetary stimulus helped fuel economic growth, sending the S&P 500 Index surging as much as 180 percent from its 2009 low. The same policies have depressed interest rates on bonds, dimming the allure of the securities.
“Bonds are overvalued,” Kuhn said. “Maybe you shouldn’t have any bonds, maybe you should have the most boring stocks.”
John Burbank, founder of Passport Capital LLC, said on the same panel that he was betting on Chinese Internet companies and reiterated that he liked Qihoo 360 Technology (QIHU) Co., Vipshop Holdings Ltd. and SouFun Holdings Ltd.
“China is not going to let Westerners win the tech and Internet battle,” he said. Burbank, whose hedge-fund firm is based in San Francisco and oversees $3.8 billion, said he wasn’t pessimistic on U.S. Internet companies.
Cooperman said he liked Monitise Plc (MONI), a U.K. provider of mobile banking, because younger people prefer to bank using their smartphones rather than visit branches.
Monitise could be sold at a “significant premium,” he said.
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