The year proved difficult to invest in stocks, with the stock market experiencing a seemingly endless cycle of spiraling movements.
Major US indexes fell last week, with the Dow Jones Industrial Average ending the week at 29,888.78 – just a day after falling below a key level of 30,000 for the first time since January 2021. Meanwhile, the S&P 500 its worst week of 2020 and the Nasdaq Composite ended the week 4.8% lower.
And as the Fed is willing to pursue a more aggressive policy of raising interest rates, this could lead to even greater stock volatility.
Venture capitalist Kevin O’Leary thinks it’s useless to try to determine market time. “I can’t predict market movements. I just can not. I’ve tried so many times, but you just can’t, “said O’Leary, chairman of O’Leary Ventures.
Instead, he prefers to own companies that he believes are sustainable. “What I love to own are companies that don’t reset.” According to him, Moderna, Pfizer and Nestle will not be zero. They have a business that is very sustainable, “said O’Leary
Both Moderna and Pfizer are pharmaceutical companies, a sector that often has significant cash flow and stable dividends, and as such is seen as more resilient in downturns.
Both companies are at the forefront of global efforts to vaccinate against Covid-19. The US Food and Drug Administration on Friday approved the three-dose Pfizer vaccine for children and the two-dose Moderna vaccine for children.
Biopharma currently accounts for about 4.5% of O’Leary’s portfolio, while the broader healthcare sector accounts for about 20%.
Investors also like consumer goods like Nestle because they are less affected by economic cycles and enjoy relatively stable profit growth and dividend payments.
“I own companies with strong balance sheets that make money. Now their stock prices are going up and down based on people’s perceptions of what the price / earnings ratio should be. And even health care has not escaped the downturn. But the companies are strong, “he added
In addition to their strong balance sheets, O’Leary also likes these companies for their good cash flows – some of which are distributed back to investors as dividends.
All three stocks are in the red this year, but Nestle and Pfizer continue to pay dividends. Nestle has a dividend yield of 2.6%, while Pfizer has 3.4%. Moderna is not currently paying a dividend.
“I never invest more than 20% in one sector”
The huge market correction this year has undoubtedly frightened some investors, but O’Leary is not worried about short-term price declines. In fact, he doubles the names he believes in.
“We are not ready and we have had a difficult few months like everyone else, but I am thinking about this in the long run… What I do is try to find points to re-enter, because I am always trying to break capital. If I believe in the history of the company, I invest more money to work on the correction, “he said.
O’Leary said he recently bought shares in Walt Disney, Adobe and DocuSign. He acknowledged that the shares had fallen “a lot”, but was adamant that they would return at some point.
He is also careful about how he manages the risk in his portfolio. “You have to have diversification,” he said Asked what his golden rules were, he said: “Never more than 20% in one sector and never more than 5% in one share,” he said, describing it as a strategy that has worked for him “for decades”. .
Dealer Veselin Zlatev