BlackRock's Doll says U.S. stocks set to catch up

Bob Doll, Global Chief Investment Officer for Equities at BlackRock, speaks at the Reuters Investment Outlook Summit in New York, December 10, 2007.

NEW YORK (Reuters) - Recent stumbles in the equity market do not herald an end to the bull market, and the best investment while it lasts are underdog, big-cap U.S. stocks with international exposure, BlackRock's global chief investment officer said on Monday.

The three advantages of U.S. multinationals are their good growth prospects, predictable balance sheets and relatively low valuation, Bob Doll, whose company is one of the largest asset managers, said at the Reuters Investment Outlook Summit in New York.

"Some may say it's a tired theme, but people have been on that theme for about four months after five or six years of massive underperformance, so I think these are still early days," Doll said.

Bargains among multinationals can be found across various sectors, Doll said, citing companies ranging from personal computer and printer maker Hewlett-Packard Co (HPQ.N) to fast-food chain McDonald's Corp (MCD.N), integrated oil giant Exxon Mobil Corp (XOM.N) and blue-chip drug maker Merck & Co Inc (MRK.N).

While he is underweight financials, he still sees good buys in the battered sector worth "nibbling on," said Doll, who prefers insurers to banks, specifically the bigger, more diversified businesses like AIG (AIG.N) and The Travelers Co (TRV.N) than monoline insurers such as MBIA (MBI.N).

Among investment banks, Goldman Sachs (GS.N) is Doll's biggest holding, and he expects its earnings will outperform its peers when it posts quarterly results next week.

The area of greatest risk, Doll said, is in relatively restricted Chinese stocks where valuations are high and the correlation between market performance and the local economy is low.

Barring a recession, Doll said he does not see the S&P 500 index .SPX dropping below 1,400 and said that, once the credit market normalizes, the benchmark could break out of 1,450 and 1,550 range on the upside.