How to trade away election uncertainty, plus recession-proof stocks
Hello everyone! Welcome to this weekly roundup of Investing stories from deputy editor Joe Ciolli. Please subscribe here to get this newsletter in your inbox every week.
Dear Readers,
If your head is spinning ahead of the election because of all the conflicting investing guidance you've gotten, find comfort knowing you're not alone.
Depending on who you ask, a Joe Biden win — which is currently the odds-on outcome — will either help or torpedo stocks. It depends on whether you think the market will focus on the fiscal stimulus he'll presumably enact, or if traders will get hung up on the tax hikes he's expected to implement.
As these expectations around a Biden victory have been priced into markets, the so-called Blue Wave outcome has crystalized as Wall Street's base case. But once again, not everyone agrees. Some pundits argue that signals are flashing under the stock market's surface that a Blue Wave is becoming less certain, due to lingering tight odds in the Senate races.
So what on earth is an investor to do if they can't get a straight answer?
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One option is to look straight past the election and focus on the medium-term V-shaped economic recovery that Morgan Stanley expects — even if a stimulus deal takes until 2021. The firm recently laid out five relatively election-agnostic trades it sees thriving going forward.
Nancy Tengler, the CIO of $750 million wealth management firm Laffer Tengler Investments, recommends a similar alternative. She doesn't see the equity bull market ending regardless of how the election pans out — so she's focused on picking the right stocks to ride the wave higher. Tengler shared with us her 12 highest-conviction selections.
For more, see below Business Insider's best Investing stories of the week, which include a wide array of additional recommendations, strategies, and tips for navigating uncertainty.
Thanks for reading!
-- Joe
Join Business Insider on Wednesday, October 21 at 2 p.m. ET and hear from three investment experts who will share their advice on how to navigate the election-season peak.
Topics will include: investing strategies for protecting your portfolio regardless of who wins the election, the individual sectors and stocks poised to benefit from distinct outcomes, and advice on how to navigate a contested result.
7 thriving stock picks from investor who's grown her mutual fund 98,000% in 12 years
Lori Keith has established a 12-year track record of outsized returns at the Parnassus Mid-Cap Fund without investing in flashy, explosive growth names. That's helped her mutual fund grow from $6 million at the start of her tenure to just under $6 billion today.
Keith said she prioritizes quality, durability, and visibility — and gave seven examples of companies that illustrate what she looks for.
Read the full story here:
Lori Keith's mutual fund has grown 98,000% in 12 years by focusing on unflashy companies. She told us about 7 such stocks that thrived in the recession — and will likely do even better in the recovery.
A stock that's soared 1,155% — and other assorted picks from a top investor
Jeff James is the lead portfolio manager of the $283.2 million Driehaus Micro Cap Growth fund and the $293.6 million Driehaus Small Cap Growth fund, which have returned 47% and 38% this year, respectively.
The 30-year investing veteran shared a micro-cap stock that has surged more than 1,000% so far in 2020, and another under-the-radar stock that he believes will have similarly "dramatic upside." James also laid out three COVID-induced small- and mid-cap opportunities in the technology sector.
Read the full story here:
Jeff James has crushed the market this year thanks to a stock pick that's soared 1,155%. He shares another bet he expects to deliver similar returns — and lays out 3 additional opportunities in tech.
A 99th-percentile investor reveals her approach — and some stock picks
Nancy Zevenbergen — founder of Zevenbergen Capital Investments, which has about $5 billion in assets — has a knack for investing early in companies that see extraordinary growth.
She detailed for Business Insider her market-beating approach to investing, and shared four stocks she thinks could be the next market leaders.
Read the full story here:
Nancy Zevenbergen is in the top 1% of investors over the past 5 years. She breaks down what she looks for in young companies — and shares 4 stocks she thinks could be market leaders 10 years from now.
Stock pick central
Seeking experts who are willing to name names? Look no further:
- Goldman Sachs says buy these 35 stocks for big gains right now, as they offer double-digit sales growth and explosive margin expansion
- Buy these 7 unheralded stocks right now for near-term upside of at least 25% as growth accelerates to a new level, RBC says
- BANK OF AMERICA: Buy these 6 financial-sector stocks that offer the most attractive risk-reward combo as the economy improves
- Morgan Stanley says buy these 44 cheap stocks poised to surge as the economy continues to recover and reopening expands.
- Cowen breaks down 8 key investing themes and 12 stocks to buy as the net worth of millennials quadruples over the next decade
- GOLDMAN SACHS: Buy these 21 high-growth stocks that have huge upside potential as future index leaders
Chart of the week
The chart above shows just how fickle major-index dominance can be. Back in the halcyon days of 2000, firms like Exxon Mobil, GE, and Cisco were among the market's five biggest stocks. Fast-forward to today, when Microsoft is the lone holdover.
It's hard to imagine a future where firms like Apple, Facebook, and Alphabet aren't the biggest names in town — but that may well be the case. Goldman Sachs recently compiled a list of 21 possible index leaders for the future.
Click here for more details
Quote of the week
"I would much rather buy a company and go to a desert island for five years knowing that a founder was leading it, because their vision and their passion would drive the company through ups and downs."
— Nancy Zevenbergen — founder of Zevenbergen Capital Investments, which has about $5 billion in assets — discussing her preference for investing in founder-led companies