Seven stocks Alphinity likes in today's market
Volatility can grip markets both within and between sectors. Sometimes, return can be generated through exposure to the right asset class at the right time. On the other hand, when performance is variable within an asset class - stock picking comes to the fore.
According to today's guest on Expert Insights, Jonas Palmqvist, a Portfolio Manager at Alphinity Investment Management, the latter applies right now.
"What's interesting right now is that we're in these stages of a leadership rotation, so it's very hard to point to a high-level sector and say, 'Here, you can do a blanket buying approach.'"
In this edition of Expert Insights, Palmqvist offers up a smorgasbord of stocks he has his eyes on. Stocks that are made for today's market, stocks that have been oversold, and stocks that are on the shopping list.
Note: This interview took place on February 21, 2023.
Which sectors are looking attractive?
What's interesting right now is that we're in these stages of a leadership rotation, so it's very hard to point to a high-level sector and say, "Here, you can do a blanket buying approach." The tech sector used to be like that a couple of years ago. There was so many winners in that. We don't see that in any particular sector. However, if you go down a notch, one level lower, for example, in consumer disc, anything that is to do with a reopening.
For example, Starbucks (NASDAQ: SBUX) is a stock we've invested in in the portfolios, and that is reopening of China and also return to office in the US. That's a theme inside consumer disc that we really like. Airbnb (NASDAQ: ABNB) is another one. So we saw that big revenge travel wave when we all were allowed to travel again. There were fears that that was a temporary move, but what we're seeing in Airbnb as they keep delivering really strong numbers is that we still, even when the economies are slowing down, we really rate the ability to travel and to spend on travelling quite highly.
So that's another stock we quite like within the consumer disc space. If you span across the other sectors, they all have bits and pieces that are really interesting. Another one where we're really rotating inside the sector is healthcare. It used to be quite a defensive sector profile that was attractive. We think the growth side of that sector is much more interesting now. So for example, Zoetis (NASDAQ: ZTS), which is in animal pharmaceuticals, it's a stock that had a bit of a headwind last year, but it's looking much better for this year. And Danaher (NASDAQ: DHR), one of the leading life science companies in the world. So, within healthcare, that theme of more growth champions rather than defences is another sub-theme or sector that we're interested in.
Which companies have been oversold by the market?
We saw last year a few stocks being probably traded too harshly, a couple of stocks, and it's very idiosyncratic. It's very stock specific. There's no blanket approach here. There's no sector part of the market there where everything looks attractive. It's very much about stock picking. We've had a couple of stocks we thought were traded too harshly. One such stock is MercadoLibre (NASDAQ: MELI). That's the biggest e-commerce operator in Latin America. Had a very tough first half of '22, earnings, headwinds, valuation came down, really turned the corner in the third quarter and we really like where they're heading now. They're seeing earnings upgrades and valuation was quite reasonable.
Another stock that's been left behind more recently, we're big believers in decarbonization and moving to green as an investment theme. There's a lot of money to be made on that as an investor. And NextEra Energy (NASDAQ: NEE), which is the biggest investor in renewable energy assets, power assets in North America, very high quality operator and a utility business. That's a stock that's been left behind more recently, and one we're quite interested in.
Which stocks would you love to own or increase exposure to if they were cheaper?
I mean, we have stocks in the portfolios that we would really like to add to, that maybe have done a little bit more in the last few weeks. We have had a pretty positive start to the year in the market. One stock that we know is a long-term winner and a champion is Morgan Stanley (NASDAQ: MS). That's a stock that we have owned before. We're still waiting for a couple of ticks in terms of our process on the earnings side. The stock has probably run ahead of that a little bit, but we know in the long-term that that's a really winning franchise, and that's a stock we would really watch closely for a pullback in markets.
As a specialist, active, core equities investment manager, Alphinity's aim is simple and effective: to identify opportunities across market cycles and invest in quality, undervalued companies with underestimated forward earnings expectations. Visit their fund profile or website to find out more.
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David is a content editor at Livewire Markets. He currently hosts The Rules of Investing, a half hour podcast where he sits down with leading experts across equities, fixed income and macro.
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