What investors should buy in this ‘short lived’ rally, according to one analyst
After October’s stock market rally , investors are debating whether stocks have hit the bottom or if it’s another short-lived bounce. Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, is in the latter camp, arguing that the rally, once again, looks temporary. “I think this is going to play out a little bit like it did this summer. We had a very poor June, we rallied July, August. And then we tested new lows and September made new lows. We’re having a little bit of a rally here — I think, again, short lived,” he told CNBC’s Street Signs Asia on Monday. Stocks slipped Monday, but still ended October well in the green. The Dow rose 13.95% to log its best month since 1976, while th e S & P 500 and Nasdaq Composite gained 8% and 3.9% respectively. Landsberg predicts that the U.S. Federal Reserve will continue to raise rates, and says earnings are decelerating. “So I think we’re in for a couple of rough quarters. [It] doesn’t mean you can’t make money, but it means you have to be real careful about what you’re buying, and importantly, avoiding certain sectors,” he said. “Investors should be adding money to the areas that will do OK in a global recession; short the areas that will not.” Stock picks Landsberg said he’s long the U.S. dollar , healthcare, staples and utilities. In equities, Landsberg likes the following: UnitedHealth , which he describes as a dominant player in health care, with consistent revenue and “outstanding” dividend growth. NextEra Energy , a leader in renewable energy, according to Landsberg, with a “very profitable” regulated utility business to support it. Booz Allen Hamilton which he describes as a dominant player in management consulting services to the U.S. government, with “extensive expertise” in defense and cybersecurity. It will “probably benefit” from world insecurity, Landsberg added. His firm has long positions in: Invesco Dollar Bullish ETF, McDonald’s , Apple , UnitedHealth, NextEra , iShares Short Term Treasury and First Trust Low Duration. What to avoid Landsberg said he would short tech, high-yield credit, and European assets. Short-selling is a bet against a stock, that involves borrowing shares and selling them in order to buy them back at a lower level, profiting from the difference. Landsberg said he’s “pretty negative” on tech, adding that the stocks still look expensive. Tech had a good run for three years, but now many major, widely held stocks are reporting “pretty bad” earnings, he added. “We don’t know where earnings are going to be. The tech industry is laying off people. You’re seeing that now — virtually every company is either slowing hiring, reducing headcount, and that indicates they kind of see there’s going to be a tough road ahead.” His firm has short positions in: ProShares Short QQQ, ProShares Short S & P 500, ProShares Short Russell 2000, ProShares Short MSCI EAFE, ProShares Short Hi Yield and ProShares Short Financials.