The inverted yield curve, the brief move out of value and into growth, and decelerating economic data are pointing to heightened risk of a 2020 recession.
But aside from buying treasuries -- which have their own risks at present -- what can investors do to find alpha return?
There is growth tech and there is value. Here's the case for both.
"It's all about the tech sector. I don't want to be in oil where we can see peak demand in our lifetime," said Zev Fima, Action Alerts Plus portfolio analyst. "I want tech which can cut through a macro economic slowdown. I think these are secular trends -- the move to cloud, automation, artificial intelligence." He mentioned the AAP trust likes Nvidia (NVDA - Get Report) , which has a high degree of revenue and earnings exposure to the cloud and automation.
The risk with some of these trends? Some of them could see a reduction in expected revenue growth with slowing business spend. But those growth rates are slightly less sensitive to the economic cycle and of course are very high.
Value and Dividends
It isn't just that some dividend yields out there are nice, or just slightly higher than treasury yields of below 2%. Many companies pay dividends that yield a "juicy" percentage, as some would say, of their share prices.
"Everyone's looking for yield. You have these sectors that have been thrown out for dead like retail," Hilary Kramer, founder of Kramer Capital Research said. She noted there are some retailers headed for bankruptcy, so big capital losses are not out of the equation for those stocks, but some struggling retailers have seen their shares prices fall so much that their yields are highly attractive.
Specifically, Kramer likes Big Lots (BIG - Get Report) , which pays a 5.1% dividend yield. She also mentioned its expected revenue growth isn't so low, so there may be some upside for capital gains. analysts also frequently note off-priced retail companies like Big Lots see a sales tailwind when people spend less money during a recession.
Additionally, she mentioned some regional banks like First Horizon Bank (FHB - Get Report) , which pays almost 4%. One risk with banks? Interest rates are either going down slightly in the next year or so or considerably, which hurts banks' net interest margins.
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