In the event of a post-Fed stock market selloff, money manager Matt Shapiro is looking to purchase stocks in Netflix, Berkshire Hathaway, and Deere.
With all of its advantages, would the S&P 500 SPX be able to weather the final two weeks of the quarter without suffering a significant decline?
“The Nasdaq has risen 50% off its lows in 5 months, and the S&P 500 36%: it’s time to prepare for pullbacks,” says Matt Shapiro, a former Chicago-based options trader who heads MWS Capital’s $183 million portfolio for high-net-worth clients.
Although it’s still a “great time to be an investor,” Shapiro told MarketWatch in an interview and email comments on Tuesday that diversification is becoming more and more crucial since markets might wobble.
Shapiro’s decision to purchase defunct tech companies in early May turned out to be foresighted. For the first time since 2022, we were able to purchase “super companies” at discounted pricing. “It was really just a unique opportunity,” he said, adding that Netflix (NFLX) was trading for less than $1,000 per share, Google (owned by Alphabet; GOGL) was trading for $165, and Nvidia (NVDA) was trading for about $100.
Alphabet’s stock closed at $251, Nvidia’s at $175, and Netflix’s at $1200 on Tuesday.
According to him, Alphabet has been “exploding” lately after being unpopular with investors for a while. “Their AI search has become one of the most important tools that people are using.”
He claimed that in recent months, they had been expanding their workforces at Apple (AAPL) and Microsoft (MSFT), two companies that many believed weren’t “the right super company.” On the other hand, despite several concerns about the EV manufacturer, Tesla’s (TSLA) stock has “out of nowhere” risen above $400. “We’re using this opportunity to trim it back,” he stated.
Big tech companies are still appealing, according to Shapiro, because they account for the majority of S&P 500 earnings growth.
“So it’s sort of like the conundrum of the markets, which is that yes, we’re in a seasonally tricky period,” he explained. “However, this is where the growth is, this AI, cryptocurrency, chips, electricity, energy is just fueling this incredible rush, and these companies are absolutely capitalizing on it.”
It’s more difficult to figure out where to diversify outside of these “super companies,” and he prefers bonds for that. In May, Shapiro was purchasing Treasury bonds. He is still purchasing Treasury inflation-protected securities, or TIPS, and long-dated Treasurys, BX:TMUBMUSD10Y and BX:TMUBMUSD30Y.
“There was a point earlier in the year and last where the 5- and 10-year TIPS were attractive, since then yields have moved quite a bit down, to where we prefer the longer end now with their higher yields,” he stated.
He acknowledges that, in light of well-established worries about the U.S. budgetary trajectory, that is a “contrarian play.” Nonetheless, we believe that the combination of a labor market that is softening and a Fed that is compelled to make accommodations will be advantageous to us.
The money manager is anticipating that a 25 basis point drop from the Fed on Wednesday could surprise investors, “especially if there is a cautious dot plot or summary of economic projections,” and that governors who want a larger cut will express disapproval.
However, Shapiro stated that lower rates “will be a good thing” that gives investors a chance to purchase, and he would be “looking to buy such names as Netflix, Microsoft, and Apple, depending on the technical positions.”
His purchase list also includes non-tech companies like Berkshire Hathaway (BRK.B), which he began purchasing in the spring, and Deere (DE).
with addition, he keeps purchasing Boeing (BA), “a premier industrial company,” and Chevron (CVX) for its dividends. He also dabbles with European luxury goods giants Hermès International (FR:RMS) and LVMH Moët Hennessy Louis Vuitton (FR:MC). These shares “have been scraping along at near five-year lows,” as a result of the industry’s overall pressure and poorer sales.
In addition to Citigroup (C), which he wishes had more financial resources, they also keep making significant investments in utility businesses, in part because of the rapid increase of power in the United States. He emphasizes that while Entergy (ETR) is contributing to the energy supplies for a sizable Meta (META) data center, it is not a simple investment.
“These stocks don’t go straight up, you have to be real patient, it’s a long-term game,” he stated.
He is also keeping an eye on the cryptocurrency market, which retail investors who were right to purchase the April stock dip have been aggressively experimenting with. He stated that, like the rest of traditional finance, they are now “underinvested” in bitcoin (BTCUSD).
“The traditional institutional sector will therefore respond with tremendous buying power to any decline in bitcoin to, say, $100,000 or even lower. Bitcoin has grown so commonplace that it has truly taken over. And you should become involved if you haven’t already,” he continued.
Although he doesn’t want to purchase bitcoin at these prices, he sees a chance to do so if there is a significant decline, particularly since history indicates that the S&P 500 will probably experience two or three corrections over the course of the next year or two.
According to the theory, “if there were a substantive downturn or pullback in cryptocurrencies, that might be coincidental to something happening in the [stock] market.” This is because cryptocurrencies are risky assets that are becoming into money assets.
