Legendary investor Bill Miller highlights 7 attractive bets for investors as markets grapple with uncertainty
- Bill Miller said there are many good bets to make even after last week's relief rally in markets.
- He touted tech leaders Amazon and Meta, value stocks over growth, the energy sector, and Chinese stocks.
Legendary investor Bill Miller believes there are at least seven attractive broad bets in the market, even in the current environment of geopolitical anxiety and tightening monetary policy.
In his latest market perspective this week, Miller said no one can be certain of the outcome of Russia's war on Ukraine — and he predicted the consequences will play out over many years, not months.
"No one knows how long the war in Ukraine will last nor what its outcome will be," he wrote. "No one knows how high inflation will go, nor when it will begin to subside."
Markets have been hit by volatility triggered by short-term risks. But US equities surged this week, after the strongest initial jobless claims reading since 1961 lifted sentiment and underscored the strength of the US economy.
Central banks are planning to frontload interest-rate hikes to fight inflation, which has prompted veteran commentators like Mohamed El-Erian and Carl Icahn to warn the risk of economic recession.
Miller noted that even after a relief rally last week, US stocks remain down year-to-date. The S&P 500 has lost 5% so far this year, while the tech-heavy Nasdaq is 9.5% lower in the same period.
The chairman and CIO of Miller Value Partners pointed to the current combination of a strong US economy — with its low unemployment, ample number of jobs, and rising wages — and the beginning of Fed rate hikes. He believes that has triggered a rotation to value stocks, from the growth stocks that led the market over the past decade.
Value stocks are those whose price appears cheap, or underpriced, relative to long-term growth when their financial performance is analyzed. Growth stocks are those companies expected to grow much faster than their peers.
He highlighted Facebook parent Meta and Amazon as attractive bets.
The energy sector holds good value too, Miller said, because shares in the sector are low considering the soaring price of oil right now.
Valuations of Chinese stocks appear low as well, particularly because Beijing has vowed to help keep markets stable, he said.
Other sectors to take notice of are financials (which benefit from rising rates), housing stocks, and travel-related sectors like airlines and cruise ships because consumers have stored the wealth to spend, according to Miller.
"Finally, looking at a basket of names down 50% or more from their 52-week highs will likely uncover some long-term bargains," he concluded.