This article was originally published in March 2022.
The overall market has sustained its bounce off the lows, continuing to trend higher amid peace talk developments between Russia and Ukraine. Yet Hightower Advisors' Stephanie Link warned investors the market environment may not be as stable as it seems.
"Even if we get some sort of resolution on the war front, we also have inflation here across the spectrum of the economy and we have a Fed that's behind the curve," Link said Tuesday on Benzinga's YouTube show "PreMarket Prep."
Despite the recent strength, the market is down for the year and several stocks have seen significant multiple contraction, she noted. The market was trading around 21 times earnings at the beginning of the year, but has since moved down to around 18 times earnings, she said.
"The historic average, depending on rates, is about 16 times, so I think we're going to be in this choppy environment for the medium term," Link said.
Link Adds To Tech Holdings: Lower interest rates are favorable for risk-on assets, so as rates rise investors may see multiples contract even further, Link said.
She has been adding to some tech stocks as multiples come down, balancing out her cyclical-heavy portfolio, she told Benzinga.
She noted that she has been buying Fortinet Inc (NASDAQ:FTNT) on weakness.
"I think cybersecurity is a great total addressable market story. This company has done a great job in terms of executing and really building out their products," Link said. "We know this theme is here to stay and that stock fell as much as 16% year-to-date."
Link On Long-Term Investing: For younger investors with longer-term investing horizons, Link recommends diversifying investments among industry leaders.
"You look for, in my opinion, big blue-chip companies, No. 1 or No. 2 in their industries and a very good CEO and a bench ... I place a lot of credibility in management teams," Link said.
Link is familiar with the management teams of each stock she holds in her portfolio, she said: "I wouldn't invest in a company if I didn't do a lot of homework."
After assessing management, she looks for solid balance sheets with free cash flow, as well as potential catalysts. Link focuses on companies that have both earnings and sustainable growth, she explained.
See the full interview here:
Photo: Pexels from Pixabay.
