Semiconductor and growth stocks have tanked this year, bonds are underwater, and even the S&P 500 is in a bear market. It’s a challenging image for many portfolios. So how should investors take care of such steep losses? Speaking to CNBC “Pro Talks,” Brian Arcese of Foord Asset Management said investors should sell any underperforming stock as soon as they realize they’ve made a “mistake” in their portfolio. “You have to look at each individual stock separately,” said Arcese, who manages two funds that oversee more than $1.6 billion in assets. “If you don’t think the business model of some of the meme stocks, like GameStop or AMC, is sustainable, then regardless of what happens in the short to medium term, you’re better off going out and buying a company you believe in.” .” Many investors hold on to losing positions and suffer “emotional pain” in the process, according to the portfolio manager. “I think it’s more behavioral than anything else.” Investors are also “afraid” of missing out on the rally rather than step back and reassess the companies they own, he added. Arcese said he would consider keeping an underperforming stock if the company made changes to its executive team or was willing to restructure and turn around the business. “But if nothing has really changed, then it’s very difficult to be fully convinced of that.” [stock]”, he added. The stock markets in 2022 have been cruel to investors of all kinds, whether they are hedge funds, billionaire family offices or meme stock traders. More than 85% of hedge fund investors and billionaires, in On average, they have lost 18% this year, according to Investing.com’s analysis of data on 271 funds from CNBC Pro. As seen in the table below, 232 funds lost value this year, with 11 funds down more than 50%. Kora Management and Spruce House Investment Management have both lost more than three-quarters of their assets by value, with the latter taking a third of those losses in the last month.”The best investors in the world are probably 60-70% right most of the time,” Arcese told CNBC. Speaking from Singapore. “Which means everyone, at least a third of the time, is investing in a company that’s down for whatever reason. Much of the pain can be avoided, according to Arcese, if investors bought only “quality companies” with great management teams that offer good returns and fundamental fu. Stock Picks The fund manager named three stocks that “will work, in sort of, in any kind of economic environment”: UnitedHealth Group, Air Products and Freeport McMoRan. Shares of all three companies are likely to take a hit in a downturn, Arcese admits, but are likely to outperform “deep cyclicals” , like semiconductors and the broader market.UnitedHealth, a US-based healthcare and insurance company, has a buy rating of 16 of 19 analysts covering the stock as of Oct. 14. Current levels Air Products, an industrial chemicals company, is an inflation hedge and an “incredibly defensive company,” according to Arcese. “They have grown their dividend for 40 years with nsecutive. They have contracts with inflation clauses with their clients that are for 15 and 20 years,” he added. Meanwhile, Freeport McMoRan, an Arizona-based copper mining giant, is a “low-cost” producer of a commodity that the world is running out of resources for, according to the fund manager. “If you believe in the energy transition, in green energy, the world doesn’t have enough copper to get us there,” he said. Six of the 12 analysts covering the stock have rated FCX a “buy” since the third-quarter results. Shares of the company have fallen 21% so far this year, mainly following copper prices.
Fund manager names 3 recession-proof stocks and reveals how to rescue the portfolio