Stock Takes: ‘Make money, or be right?’ - an investor’s recession dilemma

CMC Markets APAC general manager Chris Smith says investors should look for boring, cash-generating and dividend-paying companies during a recession. Photo / Supplied

Investors are piling into mega-cap tech stocks such as Microsoft and Apple because those companies were delivering cash flow and dividends - two attractive elements during a recession.

CMC Markets APAC general manager Chris Smith said he remained bullish on those stocks and markets generally, globally and in New Zealand, despite the economy here deteriorating.

“Being a bear sounds much smarter, being a bull sounds like you’re a bit naive. But, do you want to make money, or do you want to be right?” Smith said on the Herald’s Stock Takes podcast.

Sentiment across investors using the CMC Markets platform in New Zealand was 70 per cent negative on United States indices, with the most heavily traded being the S&P 500 and tech-heavy Nasdaq, he said.

Those indexes were up by 15 per cent and 31 per cent respectively this year, thanks to tech stocks however many fund managers had missed out on the gains because they were positioned cautiously.

“There’s always greed and there’s always too much fear.”

Smith said managers were now shifting client funds out of heavily weighted cash and fixed income positions to allocate more capital into markets.

“That’s their job, they have to beat the index.”

He had also seen “enormous amounts of short covering,” with hedge fund managers shorting hyped stocks such as Nvidia and Tesla.

Smith advised investors to play within a few assets or stocks they understood well.

“[Warren] Buffett’s done that. You just can’t do everything.”

Smith discussed how investors can determine recession-proof and inflation hedging investments in today’s episode of Stock Takes.

Stock Takes is available on iHeartRadio, Spotify, Apple Podcasts, or wherever you get your podcasts. New episodes come out every Wednesday and are brought to you with support from Fisher Funds.