Eaton Vance's Richardson Likes the Market, Not 'Four-Letter' Stocks

Looping back to the effect of geopolitical matters on our economy, you have the sentiment effect, which I think gets reflected in the price. But there's also the very real effect on the economy. People are so distressed about what's going on that they stop shopping. And CEOs are so distressed over uncertainty about future plans that they stop spending. That's a very real effect that could depress economic growth and send us back into a double-dip recession. But we don't think that's going to happen.

What we see, fundamentally, is a stabilization of businesses. A good example is UPS(UPS Quote) [the fund's No. 3 holding] reporting recently that business is basically stabilizing. It's not getting better, but it's not getting worse. That's good! In order to get better, things have got to stop getting worse. And we hear a lot of that.

I mean, are we waiting for a bell to go off? Are we waiting to confirm that Saddam's dead or that we get Osama bin Laden? Would it take something like that? I don't know, maybe not. I think continued progress overseas will help people's confidence. The market itself going up will help people's confidence.

We believe, and this is reflected in our fund's positions, that the economy's fine. Earnings will be better than expected.

3. What does this mean for large-cap growth stocks?

Out of a downturn in the economy, large-cap growth stocks tend to do quite well. Over the last few years, the game has evened out a bit. The valuation premiums that growth was accorded in the late 1990s have shrunk. It's more along their historical relation to value stocks. Actually, in some cases, you have this movement of growth stocks into the value camp, evident in the Russell 1000 indices.

The other day, one of our portfolio analysts looked this up for me. There's a Russell 1000 growth and a Russell 1000 value, and there's a subset that's in both. And it's something like 331 companies in both camps. It's enormous. That tells you that you're getting a squashing down of valuations of growth stocks, which has led to wonderful shopping opportunities for long-term investors like us. We've been using the short-term volatility of the market to accumulate good growth franchises for very reasonable prices, we think. We haven't seen these prices for years. There's a lot to like.