Donald Lindsey has a high-conviction investment idea, and
hes acting on it. As chief investment officer of the
$1.2 billion endowment fund at George Washington
University, Lindsey isnt looking to break into an
esoteric market or load up on a new product. Instead, hes
increasing the endowments allocation to good old U.S.
equities: I still love the asset class, he
Lindsey, who has captained the Washington-based fund since
April 2003, points to three trends that make U.S. shares a
smart buy. First, earnings have far exceeded expectations:
Share prices reached record highs in the second and third
quarters of 2011. Because corporate America has done a great
job of cutting costs, its fattened its profit
Second, technology is boosting productivity. Third, thanks
to their technological prowess, companies both large and small
can now do business globally where economies are strong.
Exports are starting to account for a greater amount
of U.S. GDP, says Lindsey, who oversees a total 50
percent equity allocation.
Exports rose to 13.4 percent of U.S. gross domestic product
in the third quarter of last year, according to Beth Ann
Bovino, deputy chief economist at Standard & Poors,
compared with 12.7 percent of GDP in 2010 and 10.6 percent in
Growth prospects for the U.S. economy Jim
ONeill, chairman of Goldman Sachs Asset Management in
London, forecasts 2.5 percent expansion in 2012 are
driving Lindseys preemptive strike. I believe
were going to see a U.S. renaissance in
manufacturing, he predicts. With transportation and labor
costs rising in emerging markets, Lindsey reasons, more
production will stay onshore. Meanwhile, rising wages overseas
will boost demand for imported goods.
The CIO isnt alone in his view, at least among U.S.
equity managers. U.S. companies have never been in better
shape, aside from the financial sector, asserts John
Buckingham, CIO of $2.2 billion-in-assets AFAM, a manager
in Aliso Viejo, California. A self-described contrarian
who avoids sexy stories, Buckingham says that when U.S.
companies trimmed expenses through layoffs and other
reductions, they posted major productivity gains. He now
expects to see companies looking to grow rather than
Relatively speaking, U.S. equities have put in a strong
performance of late. Yes, the S&P index of the 500 largest
U.S. companies had a volatile 2011, lurching from a 14.3
percent plunge in the third quarter back up to 11.15 percent in
the fourth before ending the year with a 0.02
percent return. But emerging markets fared much worse, diving
22 percent. Whats more, dividends pushed the S&P 500
into positive territory: a 2.11 percent return.