Dips, Chips, And Other Tips: Three Top Investors’ Recommendations For This Quarter

Dips, Chips, And Other Tips: Three Top Investors’ Recommendations For This Quarter
Carl Hazeley

over 2 years ago3 mins

  • Absolute Strategy Research recommends investors buy stock market dips all over the world and defensive US stocks.

  • BlackRock sees an opportunity in US consumer discretionary stocks, given the pile of cash American households have saved.

  • Causeway Capital Management reckons cyclical semiconductor stocks are the way to go as supply shortages give way to rising long-term demand.

Absolute Strategy Research recommends investors buy stock market dips all over the world and defensive US stocks.

BlackRock sees an opportunity in US consumer discretionary stocks, given the pile of cash American households have saved.

Causeway Capital Management reckons cyclical semiconductor stocks are the way to go as supply shortages give way to rising long-term demand.

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It’s the final quarter of the year, which tends to mean one of two things: investors either make safer bets that’ll help them see out 2021, or else shoot for a Hail Mary that could rescue their entire year. Whichever camp you’re in, the world’s biggest investors are a good place to look for inspiration: they’ve been sharing their best ideas with Bloomberg, and I’ve looked more closely at how you can put them into practice for yourself.

Idea 1: Buy the dips

This idea comes from Absolute Strategy Research, which reckons investors should continue to buy stock market dips wherever they come.

The firm believes improving economic growth and inflation will both keep company profit growth at 15-20% and support currently high valuation multiples on stocks. Absolute Strategy Research favors non-US stocks in Europe, Japan, and emerging markets. But if you want to stay in the US, the firm suggests a more defensive strategy of backing high-dividend-paying stocks.

Which ETFs are a good place to start?

Dividend aristocrats are S&P 500 companies that have consistently increased their dividend payments for at least the last 25 years. They’re a safe if unspectacular bet for a US-focused investor, and accessible via the ProShares S&P 500 Dividend Aristocrats ETF (ticker: NOBL, expense ratio: 0.35%).

Idea 2: Buy consumer discretionary stocks

This idea comes from BlackRock, which advocates betting on US consumers to turn things around for the nation’s consumer discretionary stocks.

After all, Americans now have some $2.5 trillion in excess savings following government pandemic support programs. But despite being flush with cash, stocks of companies that sell things customers want but don’t necessarily need have underperformed the market this year. That’s why BlackRock thinks now’s the time to buy into consumer-facing stocks, namely those in housing, specialty retail, and media and entertainment subsectors.

Which ETFs are a good place to start?

An ETF that tracks all those subsectors is the Invesco DWA Consumer Cyclicals Momentum ETF (ticker: PEZ, expense ratio: 0.6%). A cheaper option, however, is the Vanguard Consumer Discretionary ETF (ticker: VCR, expense ratio: 0.1%).

Idea 3: Buy cyclical stocks

Now this idea – which came from Causeway Capital Management – is trying to capitalize on a trend sparked by the pandemic. The firm recommends investing in cyclical stocks – particularly semiconductor stocks.

It’s no secret that microchips are both benefiting and suffering from a global shortage of microchips. But demand is growing too, with memory chips essential for the performance-hungry applications that power the data economy. Demand for chips is coming from now almost “traditional” areas like cloud computing and electric vehicles, as well as newer segments like augmented and virtual reality, e-cigarettes, and hybrid offices – not to mention the sheer volume needed to tackle the future of climate, healthcare, and energy…

Which ETFs are a good place to start?

The VanEck Semiconductor ETF (ticker: SMH, expense ratio: 0.35%) is one of the most popular semiconductor ETFs out there. It’s market cap-weighted, so the biggest companies (TSMC, Nvidia, ASML, Intel) affect the index more, but an equal-weighted option is the SPDR S&P Semiconductor ETF (ticker: XSD, expense ratio: 0.35%).

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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