Staying defensive and sticking with large, dividend-paying multinationals is the safest approach to equities, says fund manager Oliver Pursche. He also discusses the global economic conditions behind his overall market view.

Kate Stalter: Today, I’m speaking with Oliver Pursche. He’s the president of Gary Goldberg and Company and also a co-portfolio manager of the GMG Defensive Beta Fund (MPDAX).

Oliver, we spoke several months ago for MoneyShow, and since that time, there has been a tremendous amount of attention to the dividend payers. A lot of investors are going into that particular asset category. What are you seeing for that right now? Has that trade perhaps become crowded, and it’s time to move into something else?

Oliver Pursche: We don’t think so, Kate. Dividend-paying stocks did very well in 2011, and the defensive issues—including the large multinationals—have underperformed in 2012 so far, essentially being flat while the S&P is up 6%.

But in our view, Kate, the fundamentals and the overall global landscape hasn’t changed sufficiently to abandon a defensive strategy that pays a good dividend.

After all, the Greek debt crisis and the European sovereign debt crisis continue to be part of the landscape. China and India and other emerging market nations are still facing headwinds and slowdowns in their own economies. And with regards to the US, although we’re seeing improvement, we’re still seeing relatively high unemployment, high debt levels, and big deficits.

So from our perspective at Gary Goldberg Financial Services, we think that staying defensive and sticking with large multinational corporations that pay a strong dividend certainly makes a whole lot of sense.

Kate Stalter: One thing that I’ve heard a little bit more buzz about lately: A lot of advisors are saying you really want to get into companies with accelerating dividend payments, not just the dividend payers. Any thoughts on that idea?

Oliver Pursche: We certainly echo that sentiment. Not all dividend-paying stocks are created equal.

The first thing we pay careful attention to is balance sheet strength. We want somebody who is cash rich, doesn’t have any short-term debt that’s tough to roll over, and in general is in very strong financial shape.

The second thing we look for is a company that has and exhibits some good growth trends. In other words, companies like McDonald’s (MCD), companies like PepsiCo (PEP), Heinz (HNZ), Yum! Brands (YUM), reporting stronger earnings quarter after quarter for the last six years or so.

Companies that are growing aggressively in international markets and where revenues are going to continue to grow, that’s the second component. Then the third, ideally speaking: we look for companies that have a history of raising dividends, because those tend to perform the best over the long run.

Kate Stalter: You mentioned Greece a moment ago. In the last several trading sessions, the news has kind of felt like Groundhog Day over and over again, as the market has been waiting for some announcement from Greece on the debt talks. How do you see that situation affecting the market over the coming quarters?

Oliver Pursche: I think you nailed it by saying Groundhog Day. I think the Greek politicians are the single best poker players in the world. For the last two years, they’ve said there’s a solution and a resolution coming soon, and every time they’ve said it, the markets have rallied, and then it’s kind of fizzled away, and sometimes there’s been a sell-off, and then they’ve said it again a month later or so.

Just think about the headlines in whatever your local paper and business section of that paper is. I promise you that each month for the last 12 months, there’s been a headline that says, "Greek Debt Solution Coming Any Day Now." So from our perspective, we think that’s going to be very much part of the landscape.

As a matter of fact, we think that time is probably going to run out on them at some point or another, and they’re going to have to start talks about exiting the euro. We don’t see a scenario where that’s not the biggest likelihood.

Kate Stalter: What do you think would be the result in the market if Greece were to exit the euro?

Oliver Pursche: What we expect to happen, Kate, is an orderly exit that is going to come in a multitude of stages. First, it’s going to be discussions and announcements in terms of predicting and really telegraphing a timeline.

The second will be an introduction of the drachma to be at parity and trade side-by-side with the euro, and then a very calculated and slow decoupling and delinking of the drachma with the euro that is going to allow them to devalue their currency.

That’s the only way that we can see it happening without it absolutely decimating the Greek economy, which is already in rough shape…or for that matter, causing some significant trouble in the Eurozone as a whole.