Forget about growth stocks like technology. Analysts recommend investors go for companies with plenty of cash. The market rallied in January, including the tech-heavy Nasdaq Composite, which rose nearly 10.7% last month for its best monthly performance since July. But analysts say companies with pricing power are a safer bet than technology, given inflation is expected to remain high this year and uncertainty over when the US Federal Reserve will cut rates. lower interest. “The Fed is wary of providing too much traction to the ‘pivot’ narrative,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management. “Because we don’t know how high the Federal Reserve expects to raise interest rates, investors should be prepared for more volatility through the end of the year and into 2023.” “We’re starting to enter a bifurcated market: companies with strong balance sheets will hold up much better than growing companies that have never made a profit,” he added. Sean O’Hara, president of Pacer ETFs, issued a similar note, saying markets will remain volatile. Tech stocks are “a bit ahead of themselves,” he told CNBC’s “Squawk Box Asia” last week. “Right now, stocks that are trading at a discount to the broader market [price to earnings] that generate high free cash flow are preferable to growth names that led the last bull market cycle,” he said. a business can access cash in times of emergency or opportunity. Stock picks O’Hara said energy, healthcare and materials are better bets. Its top picks are US biotech firm Moderna and oil and gas giant Chevron. He said his company had been bullish on energy, thanks to strong free cash flow performance in the sector. “It’s not 100% the price of oil, it’s partly the reduction in [capital expenditure]”, he said. “Energy companies used to take every dollar they could get their hands on… They don’t do that anymore. what’s really driving the energy story,” O’Hara added. Blanke Schein Wealth Management’s Schein is also positive about energy and health care. There’s also a variety of economic environments,” he added. He likes U.S. mining company Freeport-McMoRan, a major copper producer.”This copper-focused company is well positioned to navigate our inflationary environment due to pricing power and strong demand,” Schein said. Investors are looking to tone down the growth trade in favor of more reliable cash flow generating stocks FCX is primarily focused on copper and gold mining, so investors will find the company more attractive to m sure metal prices will go up,” he said. Copper and gold prices have fallen 11% and 6% respectively since the start of the year.
Watch out for tech stocks – these cash-rich names are a better bet: analysts