FUNDVIEW-Look for strong growth, or big dividends -ING IM

* Forecasts of 20 pct profit growth in 2011 unrealistic

* Good entry points in energy sector after recent pullback

* Pharma stocks good bet as cheap, with big dividend yields

By Blaise Robinson

PARIS, June 4 (BestGrowthStock) – Investors, reeling from a six-week
market sell-off triggered by the euro zone debt crisis, should
turn to stocks of firms with either exposure to strong growth or
with big dividends, ING IM’s Ad van Tiggelen said.

Investors should also see the recent pullback in energy
stocks — dragged by fears the massive oil spill in the Gulf of
Mexico will lead to tighter regulation — as a good entry point
in the sector for the long term, said Van Tiggelen, senior
strategist at ING Investment Management.

Despite a backdrop of relatively robust macroeconomic data
and strong earnings, equities have tumbled since mid-April, as
investors ran away from risky assets on fears the euro zone debt
worries could undermine the global economic recovery, pushing
stock valuation levels to their lowest levels in 10 months.

“Equity valuations are quite cheap at the moment, while
balance sheets are strong and the potential for companies to
sustain high dividend is quite good,” Van Tiggelen told Reuters.

“But all this is completely ignored by the market right now,
and I can understand that, to a certain extent.”

The market has priced in a 30 percent rise in corporate
profit this year, and now people have started to fret about the
profit outlook for 2011, the strategist said.

“With all the fiscal austerity packages being announced
across Europe, it’s almost certain that growth will be very low
next year and also in 2012. That means analysts calling for
another 20 percent profit growth next year are too optimistic,”
he said.

In this environment of uncertainty, people should either
invest in shares of companies that have either extraordinary
growth, or have a good and sustainable dividend yield.

“We still like emerging markets, they fit into the
above-average growth category. We also like technology,
especially U.S. tech shares in the internet-related segment,
which enjoys high growth,” Van Tiggelen said.

Another way to capture the robust growth in emerging markets
is to invest in stocks of European companies with a big chunk of
their sales coming from abroad, he said.

“We like high quality companies with large emerging market
exposure, in the food and beverage industry for instance, and
certain staples companies. Anything with a high dollar/emerging
market exposure and a strong balance sheet is preferable,” said
Van Tiggelen, who declined to name stocks he favoured.

On the high dividend and strong balance sheet theme, ING IM,
which had 343 billion euros ($420 billion) under management at
the end of last year, likes pharmaceutical shares.

“These stocks have done very badly this year. They are
cheap, very dollar-oriented and they will have some pricing
power in 2011, although not necessarily this year.”

The STOXX Europe 600 Health Care index (.SXDP: ), home of drug
majors such as GlaxoSmithKline (GSK.L: ), Roche (ROG.VX: ) and
Sanofi-Aventis (SASY.PA: ), is up a meagre 2.3 percent so far this
year.

The sector trades at 10.2 times expected earnings, below the
broad STOXX 600 index’s (.STOXX: ) price-to-earnings ratio of
11.1.

Stocks also offer dividend yields that are among the biggest
in Europe, with GSK’s dividend yield of 5.8 percent,
AstraZeneca’s (AZN.L: ) yield of 5.5 percent and Sanofi-Aventis’s
yield of 4.8 percent.

Investment Research

(Editing by Sharon Lindores)

FUNDVIEW-Look for strong growth, or big dividends -ING IM