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Where to Invest Now

Market upheaval is nerve-racking – but it’s also replete with opportunities.

Keep a watch list of stocks and funds you’d like to pounce on when the price is right and maintain a rigorous rebalancing schedule in your portfolio, suggests Anne Kates Smith, Kiplinger's Personal Finance.

Credit Suisse has compiled two lists of stocks: Top 50 Beneficiaries of Economic Expansion and Top 50 Beneficiaries of Economic Recession.

On the first list you’ll find specialty chemical company Albemarle (ALB), cable and satellite provider Dish Network (DISH), energy equipment and services firm Halliburton (HAL), gaming company Penn National Gaming (PENN) and Signature Bank (SBNY).

On the second list is discount retailer Dollar General (DG), packaged-food company General Mills (GIS), utility NextEra Energy (NEE), real estate investment trust Public Storage (PSA), and health care tools and services firm Thermo Fisher Scientific (TMO).

The perennial contest between growth-focused stocks and value-priced fare is likely to end in a draw in the second half of the year. “We see opportunities in both value and growth,” says Saira Malik, chief investment officer at financial firm Nuveen. “Growth stocks are looking more attractive and are well positioned as economies slow. And value could benefit from still-high inflation.”

Selectivity is key with growth stocks – especially the mega-cap behemoths, many of which have already taken it on the chin. Malik still likes Amazon.com (AMZN) and Microsoft (MSFT).

In the value camp, Malik recommends energy stocks – and she is not alone, with many of the strategists bullish on the sector despite its recent meteoric rise. Energy stocks typically struggle in weaker economies, Malik concedes, “but I love the fundamentals of the industry,” she says. Supplies are tight and getting tighter because of the war in Ukraine, demand is increasing as global economies reopen, and energy firms are more disciplined producers these days, focused on returning cash to shareholders and not overbuilding.

Big oil firms top the portfolio at Fidelity Select Energy (FSENX), with ExxonMobil, Chevron and ConocoPhillips representing one-third of assets.

Investors who prefer an index approach can consider Energy Select SPDR (XLE), an exchange-traded fund also dominated by the big oil majors.

Stocks of companies that produce and process raw materials have also been strong but still look attractive.

Energy policy – no matter which way it tilts – will favor these stocks over the long term, says Jared Woodard, head of the research investment committee at BofA Securities. “Whether you care about resource independence or decarbonization, we can’t figure a world where either takes place without copious amounts of raw materials.

Given how undervalued these resource companies are, they represent great opportunities,” he says. One ETF worth exploring is SPDR S&P Metals and Mining (XME).

Analysts at Goldman Sachs recommend shelving the growth-value debate to look for stocks with stable growth and low volatility. “In the current angst-ridden investing environment, we believe stability represents a more attractive attribute.” According to Goldman, stocks that fit the bill include advertising company Omnicom (OMC), health care firm Johnson & Johnson (JNJ) and payments giant Visa (V).

Goldman also recently raised its forecast for dividend growth for S&P 500 companies to 10% this year; the firm notes that dividend stocks trade at attractive valuations and typically outperform during periods of elevated inflation.

Editor’s Note: Anne Kates Smith is executive editor at Kiplinger’s Personal Finance magazine, www.Kiplinger.com.

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