The U.S. Federal Reserve could taper bond-buying as early as next month, CNBC disclosed in a report this morning. Now that tapering seems to be a matter of “when” and not “if”, investors are scrambling to look for opportunities that are likely to offer good returns during the taper environment.
David Katz’ remarks on CNBC’s “Power Lunch”
According to Matrix Asset Advisors’ David Katz, ‘financial’ is one sector that could be a suitable investment ahead of the Fed’s announcement. On CNBC’s “Power Lunch”, he said:
Financials are going to do very well during the taper environment and when interest rates are moving up. They’ve had a good run this year. They’ve slowed down a bit but have started to pick up again. We think you can get them at very attractive prices. It’s a lower risk, better valuation investment.
Within financials, Katz is confident that the banking group, in particular, will shine as the U.S. Fed turns to tapering.
He recommends putting money into individual companies like BNY Mellon, U.S. Bancorp, Truist Financial, and M&T Bank, instead of investing in an ETF. All of the firms offer good valuations, 10-12 times earnings, and an up to 3.5% dividend.
What else does Katz like?
Another sector where Katz sees future growth potential is healthcare.
Healthcare has been a laggard over the past fifteen months. The biggest laggard within the group has been the drug companies and the drug store chain. So, we think it’s a very good opportunity. The businesses are doing well, earnings are growing, but the stocks are selling at an up to 50% discount, he added.
The Matrix Asset Advisors’ president picked names like AbbVie, Merck, and CVS that he said were particularly trading at “attractive prices”. In a market that is trading near record highs after a more than 100% increase in the last 15 months, he said, the key for a successful investor is to avoid momentum stocks.
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Wajeeh Khan
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