The chief investment officer of US core equity and portfolio manager at BlackRock Dividend Equity FundA difficult start to 2022 does not necessarily mean a tragic end for Wall Street investors’ portfolios at the end of the year.
And Tony Despirito believes that investors should redirect their investment portfolios towards value stocks, according to “Bloomberg” and reviewed by “Al Arabiya.net”.
The term value stocks refers to companies that have clear business results, revenues, and profits, and periodically distribute profits to shareholder investors.
Desperito predicted the end of the years of slow growth rates, low yields and deafening inflation that have dominated markets since the global financial crisis in 2008.
He said stock selection is now “more important” as companies grapple with high borrowing costs and record inflation, which will challenge cost structures and, eventually, stock prices.
“Investors should identify the companies most affected by higher costs, which have the pricing ability to pass those higher costs on to consumers and maintain their profit margins, and then determine which of these stocks reflect or not reflect prior changes in stock prices,” Despirito wrote in a note to clients. “.
Value stocks, which have faced challenges in a low-yielding environment, are back in vogue this year as growth stocks come under pressure due to higher borrowing costs, which affect the present value of future cash flows.
The study by BlackRock, the world’s largest asset manager, indicated that historically, value stocks have outperformed in terms of return on growth stocks and bonds, during periods when the Federal Reserve began raising interest rates, driven by strength from energy companies and the financial sector.
Desspirito advised investors to look for companies that offer “unique products or services, lasting cost advantages, or that operate in standardized and logical industrial structures”.
He also believes that companies that sell labor-saving equipment and technology will always benefit as companies seek alternatives to wage increases.
The study found that since 1988, the S&P 500 has generated an average annual return of 6% in the years in which the index fell more than 5% between January and February, according to BlackRock data.
Desperito said the company sees a short- and long-term buying opportunity forming in the wake of high volatility, including some growth stocks that have come under pressure that brought their prices down sharply.
