market folly

It's been a while since we checked in on Jeff Saut, Chief Investment Strategist at Raymond James, so let's dive into his latest market commentary. Over the past few weeks, Saut has started to advocate a neutral/cautionary stance, pointing to various near-term overbought signals in the market. Saut now feels that stocks are "searching for some kind of trading peak between now and the FOMC meeting."

The market strategist believes that the Fed will announce quantitative easing round two and that the Republicans will take back the House. While these should be stock-market friendly events, he feels that they could already be discounted. That said, Saut also highlights that portfolio manager anxiety could possibly build amongst those who are materially underweight equities. If stocks were to take off, there would seemingly be a wave of new money behind it as performance anxiety sets in.

On any upcoming pullback, Saut presents the following list of stocks to look into as they've recently beaten earnings estimates and guided higher for the next quarter: Polaris Industries (PII), Select Comfort (SCSS), Stanley Black & Decker (SWK), Tempur-Pedic (TPX), Chubb (CB), UnitedHealth Group (UNH), and Altera (ALTR), the last of which was named as an analyst best pick for 2010 and is up over 33% year-to-date.

Specific sectors that tickle Saut's fancy include technology and energy. At the Value Investing Congress, Lee Ainslie of Maverick Capital said technology stocks are cheap. Overall though, Saut is cautious in the near-term as he points many technical indicators signaling a near-term top. While he feels a dip will occur in the next few weeks, he thinks it is a buying opportunity.

Lastly, the market strategist offers bank loans as an enticing place to park some cash as per recommendations from numerous respected portfolio managers. At the Value Investing Congress, Harch Capital's Michael Lewitt also advocated bank loans as an attractive investment. Saut offers the Pioneer Floating Rate Fund (FLYRX) and the Mainstay Floating Rate Fund (MXFAX) as ways to play this.

Embedded below is the latest market commentary and investment strategy from Jeff Saut:



You can download a .pdf copy here.

For more insight from the strategist, head to Saut's risk management principles as well as his outline of the businessman's risk portfolio.