This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bubble Bursting? Only for Biotech & Internet Stocks

So what does this mean for investors? Given that valuations in certain parts of the market do look stretched, investors may need to shift strategies from what worked last year. Here are three moves to consider:

1. Go for value. Rather than chase last year's winners - a poor strategy year-to-date - investors should consider embracing some of last year's losers and adopting a general bias toward value-oriented areas of the market, as many investors do appear to be doing. Year-to-date, U.S. value stocks advanced roughly 2.1 %, while U.S. growth equities are flat.

2. Overweight large and mega cap stocks. As I've long been advocating, I believe that investors should consider trimming their allocations to small cap stocks in favor of gaining greater exposure to large and mega cap names. To be sure, large cap names are no longer cheap. U.S. large caps, for instance, finished March at 17.25x trailing earnings, comfortably above the 60-year average and the highest level in four years. Yet large caps names have still gained around 1.5% year-to-date, while small caps are down nominally on the year.

3. Embrace international markets. As I've been noting for some time, emerging markets can offer compelling long-term value. In the developed world, meanwhile, I like Japan and the eurozone. While Japanese stocks have struggled this year, European equities have outperformed U.S. stocks. And though both Japan and Europe are less profitable, and are likely to grow slower, than the United States, they both possess one characteristic in short supply locally: value.

Must Read: Gold Melts Down as China Shuns the Yellow Metal: StockTwits

Sources: Bloomberg, BlackRock Research

Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/ developing markets, in concentrations of single countries or smaller capital markets.

Funds that concentrate investments in a single sector will be more susceptible to factors affecting that sector and more volatile than funds that invest in many different sectors.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.30 0.42%
FB $104.24 -1.15%
GOOG $742.60 -1.02%
TSLA $230.26 -0.58%
YHOO $33.81 2.64%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs