Hotshot views

The great beauty of this time of year is that journalists complain that news is slow and, as a consequence, newspapers stop carrying ambulance chasing and pollie bashing stuff and replace that with think pieces.

Time to rethink
Navel gazing by experts can be useful and The Australian Financial Review's survey of fund manager hotshots was a case in point.

Around this time of year, investors should be rethinking their strategy for the trading period ahead and the starting point has to be the overall sentiment of major players who breathe shares 24/7.

A soft US landing
The economic consensus is that the US slowdown will be a soft-landing, which should be good for shares. Australia is very prone to playing follow the leader and the lead coming from overseas - Asia, Europe and the USA - looks favourable.

The consensus is
While most agree that making money in 2007 out of shares will be harder than the last three years, four out of four fund managers in The Fin Review's story are positive about playing and winning in the stock market, with slightly differing levels of caution.

This comes as expert super fund watcher, Super-Ratings's Jeff Bresnahan, tipped that the big returns of the last four years, which had made it into double-digit figures for those years, would not happen this year.

How 2006 scored
In 2006 the result for balanced funds averaged 12.5%, which is a great outcome considering most are sold on a long-term expected average return of around 8%-9%.

Remember, the big four years have coincided with the end of the post-dot.com recession in the USA and September 11 and the commencement of hostilities in Iraq. Oh yes, let's not forget the economic arrival of China and India, which have turbo-charged equities prices.

Right call, wrong timing
Bresnahan is right that the big stock price rises powering super funds can't last, but his timing might be wrong. Certainly, none of the fund managers referred to above - and these guys came from BT, ING, Perpetual and Colonial First State - said they expected a double-digit rise of the local stock market but none ruled it out.

None would expect close to 20% returns that we have seen over the last three years but the mood was sufficiently positive to make you think a 10%+ outcome for the overall local stock market would not surprise the four.

Finding the winners
It was worth noting that none tipped the end of the China/India expansion but only two out of the four tipped Rio Tinto as a top pick. The other two focused on better value non-resource stocks and that's the challenge for you and super fund managers this year.

Finding value stocks is fraught with danger, while punting on great resource stocks in a super-cycle of big demand for the products of miners makes life easy for investors.

If the calls are right
That's why Super-Ratings is a tad more negative on average fund results this year. The bad funds will really drag down the average but an 8-9% return shouldn't be too hard to achieve for most super funds, if our fund managers' optimism is not misplaced.

The favourites
For those looking for leads, the shares that got honourable mentions for this year - that is, tipped by at least by two fund managers - were Brambles, Aristocrat Leisure, CSL and News Corp.

There was one other and it tells us why Super-Ratings could be a little more negative than is needed. The fact that two, very well-considered, heavily-researched fund managers think Rio Tinto still could have upside says a lot about this unique resources boom.

The challenge is ahead
However, the fact two steered clear of resource stocks altogether tells us that 2007 will be far more challenging than the past few years.

It's often argued that index funds, that basically track what the All Ords achieves, outperform funds driven by active stock picking fund managers. This year should be a goody for testing this claim.

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