Investors are missing out on current stock market rallies due to fear.
The catalysts for growth among high-quality companies have been in place for some time, says Jean-Baptiste Nadal, managing director and lead portfolio manager of global equities at Metropolitan West Capital Management. He’s also an analyst for the Renaissance U.S. Equity Value Fund.
“Investing in a vehicle like high-quality companies represents the best opportunity for them without [taking] undue risk.”
When choosing stocks, Nadal says to analyze industry-specific data.
“We aren’t focusing on the companies that normally benefit from tailwinds,” he says. “We are looking for companies [and sectors] that benefit more from long-term industry trends.”
When looking for opportunities in the tech sector, for instance, clients can’t predict what might happen based on economic or equity market forecasts. Instead, they should look at factors like the growing tablet and mobile markets.
“The tablet market is going to be much bigger in a year or two than it is today,” says Nadal. “And I know the desktop market isn’t going to grow much.” This is a structural, industry-specific trend that could propel earnings over the long-term.
Even with this reassurance, Nadal finds clients say they’re comfortable investing in high-quality companies, but tend to take a more defensive approach.
But since they know that they need to be invested in equities, he adds, urge them to take the leap if they’re suited and help them think rationally. This could boost their satisfaction and your bottom line.
Find returns in unexpected places, for more on David Taylor’s value-investing tips and tricks