By Edward Krudy
NEW YORK, Aug 27 (Reuters) - Looking back at the more than 50 percent gains in U.S. stocks since March is enough to give investors with cash still to put to work a queasy feeling about the run-up they've missed.
But Bernard Lirola, a fund manager at Needham Funds in New York, has this advice: don't look back, corporate winners lie ahead.
'It's tough to put money to work after a 50 percent bounce,' he said in an interview on Thursday. 'For me, the best way I have to handle this is to think of March as an aberration, a hallucination, as if it did not exist.'
Lirola helps manage the Needham Growth Fund and the Needham Aggressive Growth Fund, both of which have outperformed the S&P 500 since the beginning of the year, according to fund tracker Morningstar.
The S&P 500 has rallied more than 50 percent since it hit a 12-year low in early March as the United States appears to be emerging from its worst recession since the 1930s.
The speed and magnitude of the run up has led some analysts to expect a sharp pullback. They point to what they say is a large pile of cash waiting on the sidelines for just such a buying opportunity.
Lirola says the run up is getting stretched but is not necessarily waiting for the market to retreat again, much less test the lows of March. He is eyeing the fourth quarter for signs that a return to economic growth will filter into corporate revenues after what he expects will be a seasonally weak third quarter.
Lirola is selectively investing spare cash which represents around 12 percent of the total $127 million in assets he helps manage. Within that, his smaller Needham Aggressive Growth Fund has around 30 percent in cash.
'We're chipping away (at our cash holding),' said Lirola. 'We're trying to buy more cheaply, we're trying to buy things that will outperform the market.'
In August the Needham Aggressive Growth fund was the third ranked performer for total returns over three years in Morningstar's mid-cap growth category.
Lirola is optimistic about the prospects for an economic recovery, expecting to see quarterly growth of around 4 percent through the end of the year and into next. He thinks analysts and managers are underestimating 2010 earnings.
Data from the Investment Company Institute shows some investors may be keeping their powder dry for a possible pullback, with total cash in money market mutual funds at $3.6 trillion. That is down from nearly $4 trillion in March but well above $3.2 trillion at the start of 2008.
Lirola does not expect the market to tank but has taken advantage of buying opportunities when they cropped up.
The last time the market fell in early June, losing around 6 percent of it value in a month, Lirola loaded up on stocks in the consumer discretionary sector, an area where he still sees value, as well as some technology shares with exposure to business demand.
'Last time there was a move to the downside we took 5 percent more out of cash,' said Lirola. 'But recently we've trimmed some because we felt we were at the high end of that wave ... our sense of the market is it looks overstretched - a little.'
His acquisitions included CarMax Inc, the used vehicle retailer, Italian fashion company Luxottica Group SpA , Whole Foods Market Inc and Dick's Sporting Goods Inc.
On the technology front he bought Acuate Corp, an IT service company, server developer Super Micro Computer Inc , and French communications technology company Alcatel Lucent SA.
The move turned out to be a good call as the market went on to rally another 16 percent from early July, spurred on by better than expected second quarter corporate earnings.
(Editing by Andrew Hay) Keywords: US MARKETS/FUNDVIEW/NEEDHAM (Edward.Krudy@thomsonreuters.com; +1 646 223 6314; Reuters Messaging:rm://Edward.Krudy.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Aug 27 (Reuters) - Looking back at the more than 50 percent gains in U.S. stocks since March is enough to give investors with cash still to put to work a queasy feeling about the run-up they've missed.
But Bernard Lirola, a fund manager at Needham Funds in New York, has this advice: don't look back, corporate winners lie ahead.
'It's tough to put money to work after a 50 percent bounce,' he said in an interview on Thursday. 'For me, the best way I have to handle this is to think of March as an aberration, a hallucination, as if it did not exist.'
Lirola helps manage the Needham Growth Fund and the Needham Aggressive Growth Fund, both of which have outperformed the S&P 500 since the beginning of the year, according to fund tracker Morningstar.
The S&P 500 has rallied more than 50 percent since it hit a 12-year low in early March as the United States appears to be emerging from its worst recession since the 1930s.
The speed and magnitude of the run up has led some analysts to expect a sharp pullback. They point to what they say is a large pile of cash waiting on the sidelines for just such a buying opportunity.
Lirola says the run up is getting stretched but is not necessarily waiting for the market to retreat again, much less test the lows of March. He is eyeing the fourth quarter for signs that a return to economic growth will filter into corporate revenues after what he expects will be a seasonally weak third quarter.
Lirola is selectively investing spare cash which represents around 12 percent of the total $127 million in assets he helps manage. Within that, his smaller Needham Aggressive Growth Fund has around 30 percent in cash.
'We're chipping away (at our cash holding),' said Lirola. 'We're trying to buy more cheaply, we're trying to buy things that will outperform the market.'
In August the Needham Aggressive Growth fund was the third ranked performer for total returns over three years in Morningstar's mid-cap growth category.
Lirola is optimistic about the prospects for an economic recovery, expecting to see quarterly growth of around 4 percent through the end of the year and into next. He thinks analysts and managers are underestimating 2010 earnings.
Data from the Investment Company Institute shows some investors may be keeping their powder dry for a possible pullback, with total cash in money market mutual funds at $3.6 trillion. That is down from nearly $4 trillion in March but well above $3.2 trillion at the start of 2008.
Lirola does not expect the market to tank but has taken advantage of buying opportunities when they cropped up.
The last time the market fell in early June, losing around 6 percent of it value in a month, Lirola loaded up on stocks in the consumer discretionary sector, an area where he still sees value, as well as some technology shares with exposure to business demand.
'Last time there was a move to the downside we took 5 percent more out of cash,' said Lirola. 'But recently we've trimmed some because we felt we were at the high end of that wave ... our sense of the market is it looks overstretched - a little.'
His acquisitions included CarMax Inc, the used vehicle retailer, Italian fashion company Luxottica Group SpA , Whole Foods Market Inc and Dick's Sporting Goods Inc.
On the technology front he bought Acuate Corp, an IT service company, server developer Super Micro Computer Inc , and French communications technology company Alcatel Lucent SA.
The move turned out to be a good call as the market went on to rally another 16 percent from early July, spurred on by better than expected second quarter corporate earnings.
(Editing by Andrew Hay) Keywords: US MARKETS/FUNDVIEW/NEEDHAM (Edward.Krudy@thomsonreuters.com; +1 646 223 6314; Reuters Messaging:rm://Edward.Krudy.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.