The Best Opportunities in a Half-Century

That's what veteran strategist Joe Rosenberg sees, and some of the best bargains, he says, are in the Dow Jones Industrials.

Joe Rosenberg is known for his candor, and for his understanding of all major asset classes. That comes from 50 years of experience on Wall Street, and his deep knowledge of markets and financial history. After beginning his career as an airline analyst at Bache in the 1960s, he was hired in 1973 by the late Larry Tisch at Loews, the New York conglomerate controlled by the Tisch family.

Rosenberg recalls that some people, including Barron's columnist Alan Abelson, told him that he might not last long at Loews because he and Tisch both were too strong-willed to get along well.

Yet, Rosenberg has been there ever since. He was chief investment officer until 1995, when he became chief investment strategist. He's also an advisor to Loews' current CEO, Jim Tisch, Larry's son. In addition, Rosenberg is a director of CNA Financial, the property-and-casualty insurer controlled by Loews.

Barron's has interviewed him on several occasions, most recently in February 2008. He then urged Microsoft (ticker: MSFT) to scrap its proposed merger with Yahoo! (YHOO) because he felt Microsoft was overpaying. Luckily for Microsoft, Yahoo! rejected the deal, which would have taken place at nearly double the Internet company's current share price.

Rosenberg doesn't always get things right. He was bullish on Fannie Mae and bank stocks prior to the financial crisis, during which financial stocks were crushed and Fannie Mae was taken over by the government.

Rosenberg spoke with Barron's last Monday at his New Jersey home. He's now bullish on U.S. blue-chips like Microsoft, Merck (MRK) and Johnson & Johnson (JNJ), saying investors have a historic opportunity now to buy them at attractive prices. He believes that Microsoft boss Steve Ballmer should act more like Sam Palmisano, the CEO of IBM (IBM). And he's bearish on U.S. government bonds—with yields near historic lows. Rosenberg emphasized that these are his own views, and not necessarily those of Loews (L).

Barron's: Europe has been a big overhang for the U.S. stock market. How bad is it?

Rosenberg: People are projecting a worst-case scenario about intertwined banking systems in Europe and the United States. That fear factor is what is impelling people to stay away from equities in the United States, and is precisely why equities here are so attractively priced. Now, I am not going to say all equities. There is a big disparity in valuations between the best companies in the world, large-cap companies—both growth and value—and small-cap stocks, which have done well over the past few years, and are not as attractively priced. The price/book ratio of the S&P 500 relative to the Russell 2000 is near a multidecade low (see graph).

In my 50 years on Wall Street, it is rare that I've been so attracted to some of the best and finest companies. I will name a few, but generally speaking, I feel like a kid in a candy store, because I don't know where to begin. There's Microsoft, Merck, Amgen [AMGN], Johnson & Johnson, Teva Pharmaceutical [TEVA], Staples [SPLS], Oracle [ORCL] and Cisco [CSCO]. The best companies in the world are now some of the cheapest stocks. (more)