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Experts: Don’t let crisis of the day cloud investments
Outlook » In planning for 2013 and beyond, think long term, experts suggest.

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"China is in a position to emerge as the world’s largest trading giant," she said.

Technology • This is one sector that could shine in 2013, experts say. Businesses have been sitting on piles of cash for a long time, waiting for clarity on spending cuts and tax increases.

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Once that happens, businesses can plan their spending and likely will make technology updates that they had been putting off, experts say.

Many tech companies, including Apple, Microsoft and IBM, are holding a lot of cash, said Doug Ober, CEO of Adams Express Co. and Petroleum & Resources Corp. in Baltimore. He expects some will buy back their own shares, thus increasing the value of stock held by their investors.

Energy • This sector looks undervalued, largely because of what’s been going on with natural gas, said Paul Larson, chief equity strategist for Morningstar. The marketplace has been flooded with a supply, thanks to discoveries of new sources and developments in drilling methods. The price of natural gas has fallen by about two-thirds in the past four years, he said.

Larson predicts that natural gas prices will return to normal levels in the next couple of years. Indirectly, that would benefit Chicago-based Exelon, which acquired Baltimore’s Constellation Energy in 2012, Larson said.

Natural gas is used to generate electricity. And as gas prices go up, the cost of electricity will go up for consumers, and that will mean higher Exelon earnings, Larson said.

Health care • As the number of older Americans continues to rise, so does their use of health-related products and services. This should benefit a wide range of health-related businesses, such as hospitals, pharmacy management companies and drug makers, particularly those making less-expensive generics, Ober said.

Health insurers also will benefit from having millions of new customers when the Affordable Care Act takes full effect in 2014, he said.

But not all health care-related companies stand to gain as the United States grapples with the rising cost of health care. Hospitals that have many patients on Medicaid and Medicare, the government programs that pay for health care for the poor and elderly, could see their payments reduced through federal spending cuts, Ober said.

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Bonds • "It’s going to be boring" in 2013, said Dick O’Brien, a bond expert and senior executive vice president at Folger Nolan Fleming Douglas brokerage in Hunt Valley, Md.

Federal Reserve policymakers plan to keep short-term interest rates low until employment and the economy pick up, so yields on bonds will remain low, he said.

"We will end (2013) very close to where we are presently," O’Brien predicted, "unfortunately for investors and savers."

O’Brien said some clients have been so disappointed in bond yields that he recommended high-grade common stocks that pay dividends, such as Microsoft, ExxonMobil and Johnson & Johnson.

"This is heresy for a bond person," O’Brien said. But Microsoft’s 10-year bond in December had a yield of 2.2 percent, while the dividend yield on its common stock was 3.38 percent.

Investors often consider bonds safer than stocks, but some experts warn against forgetting the big risk to bonds - rising interest rates. When rates rise, the price of bonds falls.

Fehr of Edward Jones said long-term rates — those affecting 15- to 30-year bonds — might begin to tick upward in 2013. That would be bad news for the many investors who purchased long-term bonds seeking higher yields.

"It’s nearly impossible to project when interest rates will move and where they will go," Fehr said. But at this stage, he added, rates are more likely to go up than down.

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