Factbox: Top investors' 2011 picks

ppteam

NEW YORK (Reuters) - Top global money managers, speaking at the Reuters 2011 Investment Outlook Summit, addressed concerns over the European debt debacle, the euro currency and the future of global markets. Below are some of the trade ideas they shared on Monday, offering a peek into their expectations and possible trends in the new year.

FOREIGN EXCHANGE

Predicting a focus on Spanish and Portuguese debt woes and a new U.S. recession in 2011, John Taylor, chairman and chief investment officer of FX Concepts, said a good trade would be to sell the euro and buy the Swiss franc.

Taylor, who runs the world's largest currency hedge fund, said he expects sterling to strengthen against the dollar in the long run, while the euro could fall to reach parity with the dollar.

The U.S. dollar follows a reverse track to the country's economy, Taylor said, and while the U.S. recovery remains lukewarm, the dollar has enjoyed high valuations against most major currencies.

"The dollar is a safe haven," said Gail Fosler, president of GailFosler Group, an economic advisory firm.

Jim O'Neill, chairman of Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) asset management, said the yen will take center stage in 2011 -- and lose strength. He predicted China would allow a gradual 5 percent yuan appreciation next year, and he priced the euro as a buy below $1.20 and a sell above $1.40.

SOVEREIGN DEBT

Investors were relatively bullish on European government bonds, attracted by their liquidity and the long-term benefits of sky-high yields.

"Last Wednesday, when the mood seemed to be particularly cataclysmic, my view was close your eyes, buy a basket of these things," said Goldman's O'Neill. "Put them away for six months and you'll probably be pretty happy. I still think that's the case.

Giordano Lombardo, chief investment officer at Pioneer Investments, echoed the "buy" call on peripheral bonds, highlighting Italian and Spanish debt and sounding a bearish note on German bunds. "We are quite constructive on Spain," he said. "Our big trade is to be long Italy against the German bund.

EQUITIES

O'Neill cited U.S. and Russian stocks as his top global equity market picks for 2011, predicting continued global economic growth of 4-4.5 percent. "The equity risk premium is so high, it's easy for equities to go up and we have at least 20 percent more to look forward to in the next year or two," he said.

Peering into the future of successful U.S. domestic stock plays, Esplanade Capital President Shawn Kravetz emphasized the long-term value of retail and consumer discretionary stocks, especially brands with international exposure. He said he is not a fan, however, of education stocks, spotlighting short positions in Strayer Education STRA.N and Grand Canyon Education LOPE.N. "Right now we have zero exposure," Kravetz said.

On the global arena, Esplanade still likes solar energy, an industry Kravetz predicted will offer long-term growth. He said he looks to stay short European and other western manufacturers and long high-quality Chinese firms, such as JinkoSolar (JKS.N: Quote, Profile, Research, Stock Buzz) and Renesola (SOL.N: Quote, Profile, Research, Stock Buzz), which have been building a dominant position in the sector.

Pioneer's Lombardo said his firm liked both U.S. and European equities, with the best equity picks in Europe being capital goods and industrial firms highly leveraged to emerging markets growth.

COMMODITIES

Taylor, in predicting a new U.S. recession, said he sees it weighing on commodities prices and consequently pressuring the sector to a slowdown in 2011. That would be negative for commodity-linked currencies such as the Australian and Canadian dollars.

EMERGING MARKETS

Lombardo, of Pioneer Investments, suggested exposure to emerging economies indirectly through investing in technology, materials and energy sectors within the developed world. Pioneer also likes banks with emerging market exposure, such as HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz), he said.

On the credit side, Lombardo predicted less rosy returns on EM bonds, although local currency bonds remain attractive.

"We're not going to see the support of declining interest rates as we saw in 2010," he said. "We still have a positive carry. There is a further scope for spread tightening between 30-50 basis points.

O'Neill, whose research coined the BRIC acronym to describe the emergence of the developing economies of Brazil, Russia, India and China, zoomed in on Russia for 2011.

"In the BRIC world, controversially, I like Russia the most," he said. "If I look at the forward price/earnings of the four BRIC markets, the surprise is Russia is very cheap.

U.S. ASSET-BACKED SECURITIES

Commercial mortgage-backed securities will continue to be a hot trade in 2011 but, in pursuit of high capital gains, investors may have to turn to riskier CMBS, said Paul Norris, head of structured bonds at Dwight Asset Management. He warned, however, against investing in subprime and Alt-A mortgages, ones that don't meet the strict underwriting requirements of government mortgage programs.

Norris said his company is maintaining its overweight position on the U.S. Government National Mortgage Association, also known as Ginnie Mae, which is looking to limit the number of borrowers and so tighten the supply of its credit.

(Reporting by Alina Selyukh)