Doll Favoring Energy, Tech & Health Services

April 27, 2009

BlackRock's veteran CIO believes this rally can last. But he warns that growth will likely be slow, with some sectors doing better than others.


Bob Doll has been chief investment officer of global equities at BlackRock Inc. since 2006. Before that he served in several portfolio management and executive investment positions with Merrill Lynch. Starting in 1999, he became chief investment officer of equities at Merrill Lynch Investment Management Americas. He later was promoted to co-head of that unit and senior vice president at Merrill Lynch. 

During a recent pause in market activity,'s Murray Coleman talked to the BlackRock CIO about his take on various sectors and asset classes. Do you think this rally has legs?

Doll: Yes, over time. But it's not going to follow a one-way path heading straight up. There will be some rallies followed by some pullbacks—a lot of volatility still remains in the market. We think we've seen a bottom, however. The S&P 500's level of 666 on March 6 is the intraday low for this cycle. And it's important to remember that we've seen stocks advance 30% in a relatively short amount of time. So stocks are due for another breather. How does the fundamental picture for stocks look?

Doll: Green shoots are popping up here and there. But most of what we're looking at is still brown. The big black hole we've found ourselves in finally does appear to have a bottom, though. We think that while we're not going to see positive growth in the U.S. in the second quarter, it certainly will be less negative. What sectors look particularly attractive at this point?

Doll: We'd stick with a diversified portfolio. You need some cyclical, growth and defensive postures. Our cyclical favorite is energy now. We think the price of oil has probably found a bottom. As the world gets back on its feet at a slower growth rate, oil prices will slowly move higher. And the oil companies are selling fairly cheaply these days. How about your favorite sectors in terms of growth plays?

Doll: Our favorite growth sector is technology. It's the best sector year to date in the S&P 500. And that's pretty unusual in a recession. But these companies learned their lesson in the bursting of the tech bubble in 2000. These companies are managing their resources much more efficiently and that has led to their outperformance so far. It's definitely a leader and we think tech will continue to lead the way. And what about your favorite defensive sectors?

Doll: Health care is less popular and less expensive than the utilities and consumer staples areas. We think there are some growth prospects in health care, particularly in biotech and health care services. Many new products are in the pipeline for biotechs. And we don't believe that prices for biotech stocks are extraordinarily expensive yet. With health care services, we like the fact that they've shown reasonable subscriber growth and operating earnings progress.

The concern about health care as a whole is the unknown of the Obama administration's regulatory policies towards the sector. That has left a bit of a black cloud over those stocks. But our belief is that the market has penalized health care stocks enough to make the group's risk-reward prospects relatively healthy. So we would own the sector at this point.



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