To beat a market that appears to have finally succumb to pressures from the hurricanes, Fed rate increases and penny-pinching consumers, many mutual fund managers are running for cover in more stable sectors of the stock market.
Some fund managers are bound by style-drift, a recent report from Investor's Business Daily notes, but others are more flexible and are finding a safe haven in food companies and health care.
U.S. Global Investors Chief Financial Officer Frank Holmes, whose San Antonio, Texas-based firm manages $3 billion in stock and money market funds, likes appliance manufacturers, a sector that should benefit greatly from Hurricane Katrina reconstruction once relief gets into full swing.
Jim Margard, a manager at the $6.8 billion Rainier Investments in Seattle, still expects strong growth in oil exploration and services providers, but also favors manufacturers, like jet engine and power plant casings maker Precision Castparts.
"There's relatively low exposure to economic cycle downturns in health care," he said.
Dan Chung, chief investment officer at Fred Alger Management in New York, also likes select health care names, but sees a real growth opportunity in Internet stocks.
"The demand for Internet advertising is growing," he said.
David Bagby, lead manager at the $376 million UMB Scout Small Cap Fund in Milwaukee, said, "We think gold, utilities and energy are done as growth drivers in this economy. "It's now going to be health care and tech from this point on."