(Bloomberg) — Investors should buy “dull” companies that generate steady cash flows as stock markets face growing headwinds from inflation and a potential economic slowdown, according to the chief executive officer of Causeway Capital Management.
Energy companies, utilities, metals and consumer-staples firms are likely to continue generating growing earnings even if the economy slows, Sarah Ketterer said Friday in a Bloomberg Television interview.
While former darlings like tech companies have plunged in value, there are potential winners with solid upsides in the sector, she told “Wall Street Week” host David Westin.
“In that rubble of IT, the information-technology sector, there’s some fantastically defensive companies,” she said.
“We call them value tech.”
One such recommendation: Fiserv Inc., a payment-processing firm critical for banks to run transactions. “The business is really sticky and the multiples on the stock are quite low,” Ketterer said.
Stocks inched lower this week, falling the most Friday after US employers reported they added more jobs than expected in May.
The report fueled expectations the Federal Reserve will keep boosting interest rates to cool the economy and inflation.
Now’s a bad time to buy bonds, because prices fall when interest rates climb, Chris Ailman, chief investment officer of the California State Teachers’ Retirement System, told Westin.
“I would be underweight fixed income,” said Ailman, who managed $312 billion as of April 30 at the second-largest US pension fund.
“This is a time when you need to find good long-term, but safe and boring investments.”
Among the best opportunities are illiquid assets such as toll roads, pipelines and other infrastructure, Ailman said.
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