Beat The Economic Uncertainty With These 'Attractively Priced' Stocks

There has been a lot of speculation that an economic slowdown will happen in the United States sooner rather than later according to Morgan Stanley's Andrew Slimmon.

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He told Trade Algo that the U.S. consumer still has $1.1 trillion in excess savings that are above pre-Covid levels. “ It's for this reason that the U.S. economy isn't slipping into recession."

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According to Morgan Stanley Investment Management senior portfolio manager Michael Hunt, it is difficult to predict when all of this money will be spent. This is when we will start to slow down, but I think it will happen later than anticipated.

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As Slimmon explained, despite the U.S. Federal Reserve raising interest rates aggressively, it has done so for a relatively short period, and he does not believe we are aware of the consequences yet.

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Slimmon gives investors some tips on what they can buy in the face of this uncertainty, and what they should avoid at the same time.

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Keep an eye out for stocks with a very large market cap

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Considering these factors, he cautioned that he would be especially cautious on stocks that are currently "very large," such as Facebook (formerly Facebook), Amazon, Apple, Netflix, and Google (now Alphabet).

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"The market was very strong until the regional banking crisis hit, so I think we're now back to being in an area where I should be very cautious when it comes to investing in these very large stocks as I like to be cautious if the companies do well ahead of earnings season," Slimmon said. "There's always a lot of speculation about these companies when their performance is strong.

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According to him, the only thing that has changed is the valuation of the company. That's gone up a lot, and I am not sure if the earnings numbers have changed significantly.

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Is it time for regional banks? Not so fast

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As a result of the Silicon Valley Bank crisis, regional banks were oversold following the crisis in the Silicon Valley Bank, but Slimmon believes they will bounce back soon, so he is still avoiding investing in them as a result.

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In my opinion, one reason I'm more concerned is that I expect tighter regulations on them head hedging their exposures to interest rates and durations. The government regulators will likely be under pressure to take action against regional banks harder, he said. There is a lot of finger-pointing going on right now.

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A few stock picks

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According to Slimmon, utilities, discount retailing, and trash hauling stocks are among the classic earnings-stable stocks he'll pair with risk-on sectors.

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NextEra Energy and Waste Management were two of the companies he named

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“There is a company called Waste Management that picks up your garbage every Saturday and they have a kicker - because they're converting some of that garbage into energy, so no matter what day it is or how bad the recession is, they will pick up your garbage," Slimmon said.

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“It’s not a cheap stock, but to me, that’s a defensive stock that you want to own in this environment as well.”

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Moreover, he then pointed out that he continues to find "attractive pricing" for companies in value and growth categories, including those in infrastructure industrials, refineries, building materials, semiconductors, and businesses involved in transportation and telecommunications.

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"A great investment right now would be cyclical stocks that are cheap on valuation, as this rally is expected to continue," Slimmon said.

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A semiconductor company's valuations are low, which is why he likes semiconductors.

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In addition to Pool Corp, Slimmon named Applied Materials to its list of companies.

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