Where were you during the 2008 financial crisis? Watching as a market meltdown chipped away at your retirement fund while you struggled to hold on to a job? Or maybe you were just a kid, with a front-row seat to your parent’s struggle, or maybe even blissfully unaware.
A new generation of investors is “awakening without memory of risk,” warns our call of the day, from Jack Murphy, chief investment officer of Levin Easterly Partners. But he says he’s got the solid stock picks that they need.
Murphy said the interventions introduced by the government to help fix the economy after the financial crisis are beginning to wear off, and the ending of “this sedative on the economy” is causing uncertain times for these investors.
And what they want more than anything right now is certainty from their investments, he says.
The problem is that some are quick to buy companies that show signs of momentum in their businesses, but at the same time will just as quickly sell shares of those that hint of any uncertainty.
Murphy was speaking at the private asset management firm’s annual Chief Investment Officer Summit on Monday. He’s basically talking about flighty investors.
The active money manager offers five stocks that he says stand the test of time
“We’ve done it in war and peace, through rising and falling rates and in both recession and growth,” says Murphy, adding that they steer clear of troublesome big sector or all-or-nothing stock bets.
So here are his five company bets for an “uncertain age.”
General Motors GM, +0.43% — The auto maker’s shares are up 10% year-to-date, but down about 5% for May so far. Murphy highlights a good dividend yield, better balance sheets and a pension plan that has been de-risked, along with plenty of cash on hand.
Kraft-Heinz KHC, +0.60% — Shares of the food giant are down about 26% year to date, taking a hit this month on news the company will restate results back to 2016. Still, Murphy says Kraft could be rewarded if it starts monetizing its brands — finding ways to squeeze revenue out them. Meanwhile, they’re still getting a 5% dividend yield, he says.
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Walmart WMT, -0.39% — The world’s biggest retailer is “pivoting toward technology and e-commerce,” which means it can take on Amazon AMZN, -0.08% , he says.
Nokia NOK, +0.39% — The Finnish handset maker is one to watch as 5G technology rolls out, and should continue with share buybacks, while also benefiting from a continued revamp. “Nokia also trades significantly below comparable companies and offers investors a 4% dividend,” he says.
Bio-Rad Laboratories BIO, +0.52% — The company that makes products for life sciences and clinical diagnostic industries has a lot going for it — a 35% stake in lab-equipment supplier Sartorius AG SRT, +0.33% and its restructuring plan and sales execution, which will pay off for investors, he says.
But Murphy thinks less of popular FAANG tech stocks — Facebook FB, +1.15% , AAPL, +1.92% Amazon AMZN, -0.08% Netflix NFLX, +1.77% NFLX, -1.79% and Alphabet GOOGL, +0.85% – owner of Google.
He says those companies all offer game-changing technology, but their different financial structures should make investors cautious.
Shares of Amazon and Netflix, for example, trade at about 80 and 50 times, free cash flow — a key measure of a company’s performance.
“You can have problems if you make a mistake at 50 times free cash flow, but they are likely to be a lot less severe than if you make one at 80 times free cash flow,” said Murphy.
