stocks move a little too far upward.
…We were able to take some moneyoff the table on three names that ranrapidly higher. We thought it prudent to let the “herd” have a few ofour shares in Nordstrom, SeagateTechnology and Viacom.
What good, in general, may have come
out of the GameStop madness?
I’m thrilled that a new generation ofinvestors is coming to understand themerits of investing. Many will end upwith big losses, as the valuations on anumber of the stocks they fancy aredivorced from fundamentals; and manyview the stock market as a casino orvideo game. But history shows that equity prices, on average, appreciate overtime. So those that stay in the game —and properly diversify — have the oddsworking in their favor.
What are your expectations for
earnings growth this year?
We believe there’ll be a much bettereconomic environment. Many valuestocks had an awful 2020 — their businesses were severely challenged by thepandemic. Earnings growth is anothercatalyst for value stocks, in particular.With the reopening of the economy anda lot of demand for all sorts of things,we might even expect greater than 4.2%
What are the sectors and stocks that
you like for 2021?
We like the financials, such as JPMorganChase, [and] consumer discretionaryretail stocks like Foot Locker and BigLots because consumers are going tostart spending much more.
With regard to the continuing focuson home, people are going to buymore [merchandise] online and haveit shipped to them. The pandemic hasaccelerated a lot of such trends thatmight have taken 10 years to happen —and these trends will continue.
What’s an example of a stock you like
related to home delivery?
FedEx, a package delivery companythat’s categorized as an industrial. It hasbenefited mightily from all the onlineshopping and will continue to do so.It’s trading at a very reasonable price.Other industrials that we like includeCaterpillar, Eaton and Cummins.
What about the technology and
We like Cisco Systems because theymake a lot of the hardware that’s neededto work online to conduct commercefrom home. And we like data storagecompany Seagate Technology. Both arevery reasonably valued, plus we getdivided yields with them.
Both CVS and Walgreens are participating in the rollout of COVID-19 vaccines. CVS Health Corp. is my choice. Itruns the gamut as far as health care goes.It’s trading at a very reasonable priceand always has a generous dividendyield. CVS [also] has a pharmacy benefitmanagement company as well as Aetnamanaged care.
How do you expect the stock market to
fare under President Joe Biden?
Historically, stocks do better whenthere’s a Democratic administrationversus Republican. Value stocks doterrifically under Democratic administrations. Throw in a Democraticallycontrolled Congress — Vice PresidentKamala Harris will be the tiebreaker —and that also favors equities — valuestocks in particular.
What’s the biggest threat to the market
Not getting the pandemic under control in the time frame the market isanticipating. If we can’t do that, thenthe economy won’t grow as fast andearnings won’t be [very] good. This willmushroom to create a headwind for thestock market.
[The next biggest threat is] the geopolitical climate. We’re already hearingsaber-rattling out of North Korea, andthe Middle East is always a powder keg.China is a big concern [too].
What’s your best advice to FAs on how tohelp clients during this challenging time?The hope is that, when the market cratered last spring, advisors altered theirclients’ allocations by taking moneyout of safer investments and puttingit into risker ones. As the market hasrebounded, now is the time for thosewho have been overloaded in some ofthe big winners — growthier stocks — totake money out of them and put it intovalue stocks because that’s where theopportunities reside.
Keeping clients from being theirown worst enemy is the reason advisors should exist. The emotional partof investing is so challenging. Themajority of investors don’t have thecapacity to buy, patiently hold andthen reallocate.
What’s a pressing need for FAs to fill
There are many disconcerting events thatthis country will continue to go through.Clients need professional advisors whowill provide a calming influence whenthey want to make that potentially awfuldecision to bail out of stocks.
But my big regret is that sometimesyou can’t talk people out of doing that.However, this is what makes the stockmarket. If everyone were bullish likeme, we wouldn’t have opportunities.We [value investors] want people tobe pessimistic and compulsive andoverreact because that allows us to dowhat we do.
Jane Wollman Rusoff is a contributingeditor who specializes in interviews withthought leaders. An author and prolificjournalist, Jane is founder of www.