What's the next Hot Market?

Chris Palmeri

There's no doubt real estate was the place to put your money in the past five years, much as tech stocks were in the late 90s. What asset class will shine in the balance of the decade? Large cap value stocks, says John Goode, manager of the $4.5 billion Smith Barney Fundamental Value Fund. Granted, Goode's answer is self-serving--those are exactly the stocks his fund buys. But he does have a point. Large cap stocks have been out of favor the past five years. Goode's fund has returned 2.9% per year on average. That's a full 2% better than the S&P 500, according to Morningstar, but pales in comparison to the 20% or more some real estate investors have seen. Goode says he knew the housing market was overheated when his twenty-something children started asking him to look at homes with them. His son, Richard, and his buddies in the Air Force wanted to speculate on property in Las Vegas. "The seven homes we looked at had contracts in a day," Goode says. "I told him I was going to give him a little red flag." Contrast that with big media companies which, Goode notes, are trading at the lowest valuations in twenty years. "We do not think Google is going to destroy the business model of every media company," he says. That's why he's been buying TimeWarner, Clear Channel, Disney and News Corp. Simularly, he's been investing in beaten-up pharmaceutical stocks like Wyeth and Abbott Labs. Every dog has its day, and the big companies that used to be investment leaders will likely be again. Probably more so than your home over the next five years.