Investment Strategist Ups Stock Allocation

The biggest bear among Wall Street strategists is becoming more bullish.

CIBC World Markets Inc. chief U.S. investment strategist Subodh Kumar recommended Tuesday that investors increase to 75% the amount of their portfolios allocated to stocks, up from his previous recommendation of 55%. He said stocks will benefit from expectations that earnings growth would pick up in 2002.

Kumar recommended investors reduce the percentage of their portfolios dedicated to bonds to 20% from 35% and the amount they keep in cash to 2% from 5%. He said the remaining amount should be invested in real estate.

Kumar previously had the lowest recommended stock allocation on Wall Street, according to Bloomberg News data.

“I’ve had a balanced portfolio for the past couple of years” because the risk of a decline in stocks outweighed the potential return, Kumar said in an interview. Now, “bond yields have bottomed out, cash returns are low and equities are already discounting a recession.”

He recommended investors allocate less of their portfolios to utilities and large-capitalization pharmaceutical stocks than their market capitalizations warrant.

Kumar also said investors should buy energy and financial stocks in proportion to their weights in benchmark indexes. Energy accounts for 7.1% of the S&P; 500, while financial stocks account for 17.3%.