Economics & Strategy – Portfolio Strategy: Third

Unranked last year, Morgan Stanley’s Adam Parker — formerly a Sanford C. Bernstein & Co. analyst who was No. 1 in Semiconductors from 2004 through 2006 and most recently ranked in this sector in 2010 — lands in third place. One backer describes him as “independent and provocative, with a data-driven approach that challenges conventional wisdom.” Parker believes that analysts are too optimistic in their earnings outlooks. Based on what he calls a “quantamental model” that is a hybrid of quantitative and fundamental research, he predicts that the Standard & Poor’s 500 index, which stood at 1,440.67 in late September, will sink to 1,167 by the end of the year. “The next double-digit move in the market is likely to be down, not up, because we’re very worried about the earnings trajectory for 2013,” he says. Consequently, the strategist is advising clients to position themselves defensively, overweighting such sectors as energy and health care (whose stocks often offer higher dividend yields) and underweighting such economically sensitive sectors as consumer discretionary and industrials.