It looks like everything is working in this market -- momentum and contrarian plays, big-cap and small-cap stocks -- but Aaron Task, co-executive editor at TheStreet.com told
"RealMoney" radio show listeners on Wednesday that it's time to start thinking hard before chasing the market. In this environment, fund managers will feel performance anxiety if they stayed out of stocks, Task said, because they're way behind their benchmarks if they're sitting on cash. It's now even harder to figure out where and when to get into the game now that everything has performed so well. And managers who aren't in big plays look like they've already missed out. For example, mutual fund managers who didn't get in on Apple ( AAPL) in 2005 and who stayed out because they were waiting for a pullback are starting to feel the heat. They start to worry because they want to preserve their raises, bonuses and even their jobs, so they feel compelled to chase the market. But as individual investors, we need to resist that temptation, said Task, because there will be a pullback, and that's when to get in. For example, cyclicals including DuPont ( DD) issued a warning, and there has been negative news from Alcoa ( AA) and Phelps Dodge ( PD). Combined with lower prices from automakers and a slowing housing market, these signs show that some market segments will weaken, he added.
"Near-term price weakness is short-sighted," said Belski, who recommended a 12-to-18 month perspective. He recommended being market-weight in industrial and materials, and overweight in financials, health care and tech. Merrill has encouraged investors to gradually move into large-cap stocks because it believes the market in the early- to mid-stages of recovery, Belski told listeners. Even if the economy slows, growth in general will remain positive. "Corporate America has been very risk-averse given higher interest rates and higher oil prices," he said. "If these two factors abate, then risk aversion will abate...and corporations will finally start investing the cash they have on their balance sheets." Finally, Belski said that the financial sector, especially banks, looks strong and that Merrill Lynch has upgraded the sector.
Finally, chairman and chief executive of NutriSystem ( NTRI) Michael Hagan told RealMoney listeners a bit about the company's turnaround story. He credited the company's success to outsourcing difficult projects and using the Internet to sell directly to customers. The company used traditional marketing channels to push people to go to the Web and sign up, he said, stripping out a lot of the costs. "Consumers can eat our products for about $10 a day," he said, vs. $18 a day with other programs. Plus, they save on hundreds of dollars in membership fees. While the fourthquarter is typically the slowest of the year for diet companies, Hagan said that the company's momentum will probably show continued strength even at the end of the calendar year. He said that the company had finally hit its stride on the marketing side, hence the strong performance.