Tom Villalta, co-manager of the Jones Villalta Opportunity Fund (JVOFX), sees deep value opportunities in the financial sector, and blue-chip tech. "We're looking for areas where there is an inordinate amount of pessimism," Villalta says. "We don't think there's any area that's been as disparaged as financials."
That pessimism has driven shares down to unreasonably cheap levels, he says. Top financial sector holdings as of the end of the third quarter included Goldman Sachs (GS) Citigroup (C), Wells Fargo (WFC) and J.P. Morgan Chase (JPM). Large-cap tech stocks, among other positives, are looking forward to pent-up demand on the part of enterprise customers and offer U.S. investors exposure to emerging markets.
More compelling is that a lot of staid names, such as IBM (IBM), Intel (INTC), Microsoft (MSFT) and EMC (EMC), among others, are going to return a lot of cash flow to shareholders in the coming years, Villalta says. "Gone are the days when Microsoft didn't pay a dividend."
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