Guest: Hank Smith, Haverford Investments, Co-CIO
Topic: Market Monitor
“History does not repeat, but it often rhymes” Mark Twain
3 years ago, like today, there were fears of a global recession, led by a China hard landing; a collapse in oil prices and fear of the Fed tightening too much. Then as today, economically cyclical stocks got hammered. But 3 years ago China instituted stimulus, the Fed waits 1 year to raise rates, and there was no global recession and those cyclical stocks turned out to be great buying opportunities.
Today we feel there is little risk of a recession in 2019 or 2020.
We think China will add more stimulus, the Fed will pause on raising rates, tariffs will be reduced and the issue will fade, and economically sensitive stocks like Dow Dupont (DWDP) and J. P. Morgan (JPM) will prove to be excellent buys.
Apple’s (AAPL), while not a cyclical, selloff gives new investor a great buying opportunity.
3 stock picks:
Theme: Investors are getting these companies for sale
Dow DuPont: Excellent management that has taken out $3.5 billion of unnecessary cost out of the company over the past 3 years. The company will split into 3 separate companies in 2019 and will become more focused. Investors buying the stock is getting it at an attractive price for the next 12 months and will be getting 3 different companies that will all pay a dividend
JP Morgan: Best in class, great management, fortress like balanced sheet and is returning money back to shareholders in buy backs and dividend increases.
Apple: The stock is down so much this year. It has had a major correction and is in bear market, but it is still a world class brand with billions of dollars on its balance sheet. The company is actively buying their stock which is good for shareholders. This is an excellent opportunity for new money to get into the stock now
Disclosures: Hank owns, his family owns and Haverford owns.