One market strategist issued a reminder to investors amid the volatile backdrop for markets: Owning stock in quality companies is something that will pay dividends over time — even despite short-term pain.
“I do like to remind people that buying good companies and holding them through difficult periods is kind of the key to growing wealth and reaching your goals,” Baird Strategist Michael Antonelli said on Yahoo Finance Live (video above).
The focus on quality stocks seems to have fallen by the wayside in 2022 as investors fret about a potential recession at the hands of an inflation-fighting Federal Reserve.
The S&P 500 is down around 13% so far in 2022 while the Dow Jones Industrial Average is off by 9% and the Nasdaq Composite has fallen by about 19%.
Antonelli suggested that investors ask if there are “companies out there that just sort of got caught up in this whirlwind” of selling during times like much of 2022.
“There are companies like Apple executing on their business plans really well,” he explained. “And remember, the reason why these companies are so good is because they have suites of people every day trying to solve problems. And that doesn’t change when inflation is high, when inflation is low, when… Russia invades Ukraine. Any of that. … And that’s what makes them so great.”
And the tide could turn for shares of high-quality companies that fall under catalyzing investment themes, according to strategists at Citi.
“The market has been deservedly focused on a mix of macro risks and influences this year,” Citi strategist Scott Chronert said in a new note. “As we move closer to recession resolution, the longer-term growth profiles associated with many themes may provide some performance edge, particularly on the heels of year-to-date valuation corrections. A new trading environment on the other side of current concerns may mean stock-specific valuation catalysts may be more closely tied to fundamentals [and] give a lower expected macro growth profile and lesser central bank accommodation.”
Chronert outlined six compelling investment themes: automation/robotics, internet-driven business models, artificial intelligence, emerging market consumers, top brands, and net zero.
Apple, Microsoft, and Disney are a few of the names highlighted by Citi’s strategists as quality thematic plays.
Year to date, Apple and Microsoft shares are down by 7% and 16%, respectively, despite the tech giants reporting solid sales growth in the second quarter and showcasing billions of dollars in excess cash flow.
Disney’s stock, meanwhile, is down 29% on the year in spite of the travel momentum hinted at by second-quarter results from Marriott, Airbnb, and Hilton.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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