How Four Pros Would Invest $100,000

Plenty of investors are struggling to commit right now. And we’re not talking about their on-and-off love lives: never-ending recession threats and potentially unsustainable tech rallies are uprooting even traditional strategies. That’s why Bloomberg asked four top-of-their-game investing professionals where they’d invest a $100,000 windfall now. After all, they’ve been there and done that. I’ve checked out their answers, and figured out how you could adapt their tricks to suit your portfolio.

Idea #1: Explore emerging markets

Dan Suzuki isn’t fussy. Far from it: Richard Bernstein Advisors’ deputy chief investment officer reckons there are great investment opportunities just about everywhere right now. Well, except for the “magnificent seven” tech stocks, Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. Suzuki says they seem to be in a bubble.

He’s a big fan of emerging market (EM) stocks, though. Suzuki believes that if you can stomach some volatility, you’ll want to dip at least one toe in there. See, he thinks valuations are one of the best predictors of long-term returns, even though he says they’re an awful metric to use for timing the market since stocks can stay cheap for ages. And right now, the valuation discount between EM stocks and their US cousins is approaching all-time highs. That’s despite the fact that EMs have more enticing demographics – think stuff like population growth, the proportion of working versus aging residents, and potential incomes. Plus, EMs are more exposed to companies that could benefit from inflation staying higher than usual for longer.

Related ETFs:

The SPDR Portfolio S&P Emerging Markets ETF (ticker: SPEM; expense ratio: 0.07%) would get you slices of a broad range of EM stocks. Bear in mind, though, that most EM ETFs – including that one – contain more than a sprinkling of Chinese stocks, around 28% of the fund usually. So if you’re cautious about China’s outlook, you may prefer specific EM countries with strong, secular growth. In that case, you could pick Mexico via the iShares MSCI Mexico ETF (EWW; 0.5%) or India using the iShares MSCI India ETF (INDA; 0.68%).

Idea #2: Let’s get industrial

Yana Barton, managing director and portfolio manager at Eaton Vance, likes the look of industrials – a sector that’s lagged behind the S&P 500 by nearly eight percentage points this year. The spread of 12 industries that fall under the industrial banner could offer you diversification, with some companies very cyclical in nature and others more affected by company and industry-specific factors.

The waste industry might not be the most glamorous pick, but Yana likes its strong growth potential. Companies in this space typically have long-term contracts in place, the prices of which tend to rise along with inflation. And sure, lower recycling prices and project delays meant the industry’s recent earnings were disappointing, but that probably means most investors are underestimating these stocks. What’s more, a lot of waste companies are focused on green energy and sustainable projects, like turning biogases into natural gas, and those initiatives have huge potential.

Yana also likes the defense industry, which – like most non-tech companies – has lagged behind the broader market lately. This one’s a simple case: many of the industry’s companies create strong cash flows and have stable business models

Related ETFs:

The Vanguard Industrials ETF (VIS; 0.1%) adds a broad range of industrials to your lot, and the iShares US Aerospace & Defense ETF (ITA; 0.4%) drills down into the defense industry with stocks like Lockheed Martin and Northrop Grumman. If you fancy dumpster diving, you could consider the VanEck Environment Services ETF (EVX; 0.55%), which aims to track the performance of the NYSE Arca Environmental Services Index.

Ideas #3: Value comes first

Anthony Roth, the chief investment officer of Wilmington Trust Investment Advisors, is steering clear of expensive assets – and yes, that includes Big Tech names. He’s spinning out of growth and straight into value when it comes to bigger companies, and says all small-cap stocks – both growth and value ones – look relatively attractive. After all, small-cap stocks’ valuations are way behind big-cap ones right now, with the biggest gap for 15 years between the two. But while they’re cheap, the market tends to be less efficient due to the smaller number of players, so you might want active management when dealing with them.

He has his eye on cyclical sectors like industrials, materials, and energy. Financial stocks too, which should do well if the US economy avoids a recession. Anthony’s especially keen on big banks, as they tend to be more immune to a downturn than the regional banks.

Anthony and his firm not only prefer the US market, but they’re actively shunning other developed markets. Europe’s getting a particularly cold shoulder, since Anthony’s firm thinks the continent’s in “stagflation”. The US, meanwhile, has a more active monetary and fiscal policy, mature markets, and healthier demographics. Personally, I’d add that the country’s edge in the technology sector also gives US stocks a competitive advantage.

Related ETFs:

For value stocks, the iShares MSCI USA Value Factor ETF (VLUE; 0.15%) could fit the bill. For small-cap stocks, you could consider the iShares Core S&P Small-Cap ETF (IJR; 0.06%), which aims to track the performance of the S&P SmallCap 600 Index. Or if you think it’s worthwhile to invest in a “smart beta” (or active) ETF in the small-cap space, the Avantis US Small Cap Value ETF (AVUV; 0.25%) could be worth considering: its recent performance – admittedly not an indicator of future performance – looks pretty good.

Performance of small-cap indexes and ETFs over the past five years. Source: Bloomberg.

For raw cyclical-sectors exposure, you could consider the iShares U.S. Basic Materials ETF (IYM; 0.39%) and the Energy Select Sector SPDR (XLE; 0.1%).

Ideas #4: Shiny things

Michael Purves, founder of Tallbacken Capital Advisors, is calling out underperformers in the uranium, silver, and bank stock markets. That’s fitting: he likes to invest in thematic sectors with structural growth when they’re beaten up and trading for cheap. That’s also why he’s not all-in on AI right now: valuations look too stretched.

Instead, he’s eyeing up the technology surrounding uranium instead. It’s cheaper and safer than it was a couple of decades ago, and nuclear’s a hot topic among future-thinkers. The controversial energy source creates minimal carbon emissions, so it’s tipped to form the next generation of ESG instead of current staples solar and wind. Michael also likes silver. He thinks it’s cheap at the moment, and has more than a few reasons to be excited about the shiny white metal. In the financials sector, Bank of America, which is trading at a pretty attractive valuation at just below a 9x price-to-earnings ratio, stands out to him.

Related ETFs:

The Sprott Uranium Miners ETF (URNM; 0.85%) is one of the best ways to gain broad exposure to uranium stocks. The iShares Silver Trust (SLV; 0.5%) tracks movements in the silver price, while the Global X Silver Miners ETF (SIL; 0.65%) provides diversified exposure to silver mining companies.