If 2020 was the year for the stay-at-home stocks, well, 2021 wasn't. Bloomberg columnist John Authers points out that an investor who shorted the S&P 500 home entertainment stocks and invested in regional malls instead would have returned a hefty 120% gain this year.
So is the recovery story totally done? Maybe not. Need to Know recently examined what an artificial intelligence-driven portfolio manager was doing -- shedding big tech names such as Microsoft, Alphabet and Amazon.com for a more well-rounded portfolio.
Kevin Muir, author of the Macro Tourist blog and a former institutional equity derivatives trader, is expecting what he calls a violent rotation out of large-cap growth into more value-type names in the first quarter. U.S. economic growth is shifting to one driven by the lower end of the wealth spectrum, boosted by fiscal instead of monetary stimulus, which will lead to what he calls a regular, old-fashioned economic expansion. "This means stocks like industrials and other boring companies that facilitate traditional economic growth are what you want to own," he writes.
But how to do that? There's an exchange-traded fund, the ProShares S&P 500 Dividend Aristrocrats, based on an index that limits membership to S&P 500 companies that have raised their dividend for 25 consecutive years. MarketWatch data show the fund's top sector exposures are industrials, with a 23% weighting, and consumer goods, with 20%, and only 3% exposure to technology.
The opposite, says Muir, of a zero-coupon-like growth stock would be a high-paying stable dividend company. "If you are looking for a way to fade the Top 8 basket dominance, then what better way than owning a bunch of companies that pay regular dividends, aren't bid to the moon with speculative exuberance, and will participate in the upcoming economic upswing," says Muir.