We asked five market veterans how investors should approach the selloff in stocks—and where they’re finding opportunities now.
Catherine Wood
CEO, ARK Invest
No one can accuse Catherine Wood of being a by-the-numbers investor. Wood, whose tech-focused firm has more than $10 billion under management, is famous for being the biggest Tesla bull on the Street. Now she’s taking her focus on “disruptive innovation,” applying a long-term view to the coronavirus-ravaged stock market, and betting on some beaten-down shares.
The Tesla bull is loading up on “names that have been crushed.”
Wood notes that high-fliers like Netflix, a high-conviction holding for ARK, have held up well in the market plunge. But they don’t offer the kinds of returns she’s seeing from “names that have been crushed.” That’s why Wood is selling some Netflix and moving into companies that are going to “gain more traction because [they’re] solving a lot of problems” illuminated by the coronavirus. One stock Wood picked up on sale is 2U, an online education technology company catering to homebound students. Another is online real estate marketplace Zillow, which she believes will benefit from “an acceleration toward online real estate shopping.” —Anne Sraders
Liz Ann Sonders
Chief Investment Strategist, Charles Schwab
The stock market isn’t always the best bellwether of what’s to come in the economy. Though stocks rallied powerfully in early April, Schwab’s Liz Ann Sonders isn’t bullish yet. “I think we’ve just scratched the surface in terms of the hit to the labor market,” she says. “I’m very confident that the hit to the economy, at its maximum, is still ahead of us, not behind us.”
The hit to the economy … is still ahead of us.
That’s why Sonders is watching unemployment data, both initial and continuing claims, as well as temporary staffing and electricity output (tracked by the New York Fed’s newly launched Weekly Economic Index)—“stuff that really picks up the weakness we’re seeing and we’ll continue to see.” Among stocks, she’s avoiding small-cap companies (with their shaky balance sheets) in favor of large-cap stalwarts. She also favors the health care sector—and while that call predates the pandemic, it’s “reinforced to some degree by the virus.” —Jen Wieczner
Mohamed El-Erian
Chief Economic Adviser, Allianz
Allianz’s chief economic adviser Mohamed El-Erian gets asked lots of questions these days: Where will the market bottom? When should investors put their money to work? But as investors keep searching for that bottom—and signs that the coronavirus crisis may be abating—El-Erian suggests, instead, they ask themselves three questions:
Investors need to answer ‘yes’ to three questions before the all-clear.
“One: Do you as an individual feel that if you catch the virus, you will be treated well [and with enough equipment] in a hospital or not? Two: Can you identify with some confidence who has the disease and who doesn’t, and what is the risk of that disease spreading? Third: How comfortable are you about your immunity?”
Until investors can answer those questions, El-Erian tells Fortune, “we’re not going to be able to really have certainty that we’ve turned the corner”—and investors won’t be able to be optimistic in a decisive way about their portfolios. —A.S.
Lori Keith
Portfolio Manager, Parnassus
When the market is in free fall, visualizing long-term gains can be difficult. But Lori Keith, who manages Parnassus’s $4.7 billion Mid Cap Fund, is applying a disciplined approach even as stocks swing wildly. She’s “looking for those companies that are going to be winners of tomorrow”—with wide competitive moats and strong balance sheets that are poised to gain significant share from all the dislocation that’s occurring right now. “That’s where investors should really be thinking as you look out on the back half of this recovery.”
Find companies poised to win in the “back half of this recovery.”
One name that checks her boxes? Clorox. Keith believes the disinfectant-wipe maker will prosper as people stay focused on sanitation and infection control. Another is Digital Realty, a real estate investment trust specializing in data centers. Keith sees it benefiting as more people work from home and companies shift systems to the cloud.
—A.S.
Teresa Barger
CEO and Cofounder, Cartica
As the manager of a $1.2 billion hedge fund investing exclusively in small- and medium-size companies in emerging markets, Teresa Barger views the coronavirus from a specific point of view. She has divided her investing world into three “waves”—where the coronavirus was (Asia), where it is (Europe), and where it has yet to really spread (Africa and Latin America). Accordingly, she’s taking a wait-and-see approach to the Southern Hemisphere where “there’s not enough data.”
Asian markets are “definitely past the worst.”
For now, Barger is “really focused on north Asia, where we know what their capacity is to deal with it if there is another outbreak,” she says, noting the region’s relatively ample medical supplies and strong public-health infrastructure. “I think they’re definitely past the worst.” That includes Korea and Taiwan, where she’s fond of tech companies whose businesses track semiconductor demand—and which she prefers over Chinese companies, whose stock prices have already bounced back significantly.
—J.W.
A version of this article appears in the May 2020 issue of Fortune with the headline “What’s the smart money doing?“
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