Outlook murky, but optimistic

After bruising year, investors will limp back into market

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CORRECTION

An investor outlook story Sunday in the Work & Money section incorrectly stated the name of a Chapel Hill investment firm and the number of its employees. The firm's name is Oak Value Capital Management, and it has 13 workers.

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For most investors, 2008 was a year to forget. Stocks caused mainly pain, with declines not seen since the Great Depression. Nearly everyone with money in the market will cringe when year-end statements arrive. Some might take small solace in tax losses.

To see what 2009 might hold, we queried local professionals who manage billions of dollars for clients. The bottom line is they don't expect big things. Flat or modest returns were common refrains.

There is optimism that a rocky first half could bring brighter days as the recession wanes. But that's only if government efforts to jumpstart the economy succeed, oil doesn't spike again, and a new president and Congress don't cause more harm than good with stimulus plans.

Inside you'll find some advice, stock picks and other useful information from Triangle investors who are paid to place big bets on Wall Street. As always, keep in mind that no one knows exactly where the stock market is headed. Doing your homework, assessing your risk and staying diversified are crucial for all investors.

Hal Eddins

VICE PRESIDENT, CAPITAL INVESTMENT COS., RALEIGH

Assets managed: $1.2 billion

S&P 500 prediction: up 12 percent

Stock picks: BB&T, Bank of America, Lowe's Cos., Cisco Systems, Hewlett-Packard, Intel, UPS

Eddins has managed money for 21 years and doesn't see any sectors to avoid right now. Stocks of many companies are bargains, he said. He included BB&T and Bank of America as financial companies that should show strong returns in the long run.

He likes Lowe's because it's "a less risky way to play the housing sector." And UPS should rise as the economy recovers and more packages get shipped. FedEx also is a good bet, Eddins added, but with more international exposure might take longer to recover.

Several technology stocks are "fantastic buys," Eddins said. Cisco has lots of cash, and Intel pays a rich dividend.

"We'll look back two years from now and say, 'Good God, why didn't we load the boat?' " with many stocks that have been beaten down, he said.

For those not willing to take bets on individual stocks, Eddins said, the easiest way to get a good return is through through exchange traded funds, or ETFs. They're securities that track a basket of stocks like an index mutual fund but trade like stock. In particular, Eddins mentioned the ETFs that track the Dow Jones Industrial Average and the Russell 2000.

"You at least want to have the market covered," Eddins said.

Jeffrey Schappe

CHIEF INVESTMENT OFFICER, BB&T ASSET MANAGEMENT, RALEIGH

Assets managed: $17 billion

S&P 500 prediction: up 5 percent to 10 percent

Stock picks: Wal-Mart, Comcast, Merck and Johnson & Johnson

Schappe expects 2009 to bring better fortunes for investors, even as the recession worsens.

One big plus is that the efforts by the Federal Reserve and Treasury to prop up the economy should begin paying off in the second half of the year. "They're going to do whatever it takes to cushion the fallout and to stimulate the economy and unlock the credit markets," Schappe said. "Historically, they've always gotten what they wished for."

The bad news is that the global economy hasn't hit bottom, which could create a rough ride for risk-averse investors during the first six months of the year. Lagging economic indicators such as the unemployment rate will get worse.