Pimco's El-Erian: 'Lots of opportunities' left

There are still areas of the market with significant upside left, PIMCO CEO and co-CIO Mohammed El-Erian said Thursday.

"I would focus on the following: Investors want to go where the Fed can succeed in its financial repression," he said. "That means the front end of yield curves. That means selling volatility."
On CNBC`s " Fast Money ," El-Erian, who has USD 2.04 trillion in assets under management, said that the Federal Reserve`s monetary easing would help certain stocks.
Interest-rate-sensitive sectors were worth a look, he said. "They are going to do better."
"Third, look for companies that still have scope for financial engineering," El-Erian added. "This is a great environment for financial engineering that brings cash to the equity holder, either through buybacks or through higher dividends.

"And finally, don`t forget those sectors that were severely dislocated by concerns about the taper. The muni sector, high-quality munis, emerging market bonds, so there`s lots of opportunities. But we must remember, and this is really important, the Fed`s desire to control outcome doesn`t mesh with ability to control outcome, so the scaling of trades is really important here."

El-Erian said that the Fed didn`t taper its USD 85 billion-per-month asset-purchase program for three basic reasons: A tepid economic recovery, continuing high unemployment and the looming debt-ceiling fight in Washington.
"They got really scared when they saw what happened in May and June, and therefore they`ve become more risk-averse. That`s a negative reason for not tapering, not a positive reason," he said. "And secondly, we have a major change in leadership. So, we`ve got to be conscious of the motivation behind this when you put on the trade.
"The real economy is a different issue, but the markets love it."
- By CNBC`s Bruno J. Navarro . Follow him on Twitter @Bruno_J_Navarro. - CNBC`s Katie Young contributed research to this report. Follow her on Twitter: @katiecnbc.
Trader disclosure: On Sept. 19, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC`s "Fast Money" were owned by the "Fast Money" traders: Josh Brown is long AAPL; Josh Brown is long VAW; Joe Terranova is long VRTS; Joe Terranova is long MS; Joe Terranova is long GS; Joe Terranova is long OXY; Joe Terranova is long HOS; Joe Terranova is long HAL; Joe Terranova is long APC; Joe Terranova is long SBUX; Joe Terranova is short LTD; Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long WFC; Stephanie Link is long CSCO; Stephanie Link is long FB; Stephanie Link is long LOW; Stephen Weiss is long LCC; Stephen Weiss is long AAMRQ; Stephen Weiss is long DAL; Stephen Weiss is long C; Stephen Weiss is long THC; Stephen Weiss is long CYH; Stephen Weiss is long AAPL CALLS.

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