This is a stock picker’s market.
Ken McAtamney, head of William Blair’s global equity team, said in a report that the environment will create an important backdrop for active investing.
Understanding companies with differentiated business models, unique cultures, and durable competitive advantages will be increasingly crucial to determining investment performance in this complex environment.
One of the biggest mistakes an investor can make is assuming that all stocks in a sector should rise and fall in tandem. That view of the world is too simplistic.
Instead, investors need to do their homework and find companies with strong business models.
Paul Moroz is the chief investment officer with Mawer Investment Management.
Moroz said that it’s important to find companies that aren’t dependent on discretionary consumer spending. He said that companies like insurance broker Marsh & McLennan and cleaning supplies firm Bunzl are examples of boring companies that are doing well.
Moroz likes Microsoft because of its steady subscription revenue for its many business software products.
The leaders of the Big Tech are diverse. That’s why investors shouldn’t assume that the problems of Netflix are bad for the rest of the tech sector, or that the good news ofTesla gives traders the all clear to buy every momentum stock in sight.
“First quarter results so far highlight our view that investors need to be more cautious,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a report this week.
Haefele pointed out that the disappointing outcome for Netflix shouldn’t obscure the robust outlook for subscription services, and that the record profit ofTesla shows rising global demand for electric vehicles.
The big miss could be a company specific issue. It isn’t a reason to shun all of the other FAANGs.
The investors are still willing to invest in companies that are doing well. The success ofTesla shows that traders are not afraid of high-priced stocks.
When you compare the rest of the auto industry toTesla, it’s obvious that it’s expensive. As long as the hype continues, that doesn’t matter.
Louis Navellier, founder of Navellier & ASSOCIATES, said in a report Thursday that paying up for future earnings potential is still a rational investment with the right business model.