While so far this year we’ve seen the market dominated by “the spectacular rise and fall of speculative stocks and a continuation of the small cap rally,” a recent article in Barron’s suggests that the large-cap investor may be poised for long-term win.
The article offers comments and insights from Randall Eley, chief investment officer at Edgar Lomax, who argues that Identifying as a large-cap value investor these days “takes a lot courage…or a naivete,” and adds, “one of the most important ingredients of a successful investment plan is patience. So, we’re comfortable structuring portfolios that we think are going to perform strongly over lengthy periods of 10 years or more.”
Even though large cap stocks might not currently be in fashion, Eley argues that it’s a strategy worth pursuing given that such companies tend to have higher-than-average dividend yields. At the moment, he favors energy, financials and health care.
Regarding the energy sector, Eley says that much of the pandemic-related disruption will prove temporary, while the pressure to transition away from fossil fuels is a longer-standing issue that management teams have been focused on for years. The sector, he says, has not “even begun to burn out its potential.”
Financials look attractive, says Eley, noting that banks were wise to set aside large loan loss reserves given the uncertainty of the pandemic. But he believes the picture has brightened for the group as a whole and can continues to do so.
While healthcare may be an obvious choice given the rollout of the Covid-19 vaccine, Eley says his firm targets companies “that were profitable all along” regardless of their position in the pandemic landscape.