Favorable market conditions are bringing out the bullish side of cautions fund managers
The days of some prominent equity mutual fund managers stockpiling cash may soon be near an end as the price-to -arnings ratios of blue-chip stocks continue to crest, Morningstar said in a report earlier this week.
Stock fund managers who have allowed cash holdings in their portfolios to exceed 25% now say that large companies are available at bargain prices despite predictions that interest rates may soon rise. Bob Rodriguez, a co-manager of FPA Capital's Clipper fund, and Bill Miller, the lead strategist of Legg Mason Value, are both looking to buy discounted equities with sizable cash holdings in their funds. "Stocks are cheap compared to bonds and cash," Miller wrote in a recently published newsletter in which he also discounted the threat of rapid interest rate hikes by the Federal Reserve Bank and anticipated low interest rates during the next few quarters.
T. Rowe Price Equity-Income fund manager Brian Rogers shares Miller's bullish outlook on blue-chip stock and favors pharmaceutical companies. His fund recently added Johnson & Johnson, despite the lackluster performance of most drug manufacturers during 2003 and the first quarter, according to Morningstar.
Atlanta/Sosnoff founder Martin Sonsnoff, a strong proponent of growth-at-a-reasonable-price investing, also known as GARP, has a track record of letting cash holdings pile up to 25% in his fund when he thinks the market is overprice. Lately, Sosnoff has depleted his cash holdings during a buying spree of home-builder stocks like D.R. Horton.

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