Financial advisor Duncan Rolph of Miracle Mile Advisors joined “Investing with IBD” this week to discuss why current stock market highs have led him to adopt a defensive investment strategy for his high-net-worth clients. He also described wealth protection strategies to combat market risk. Plus, we take a look at three stocks: Brookfield Asset Management (BAM), CVS Health (CVS) and Focus Financial Partners (FOCS).
Audio Version Of Podcast Episode
Video Version Of Podcast Episode
Current Stock Market Highs ‘A Warning Sign’?
Record low unemployment and consumer spending continue to boost the current stock market to record highs. But according to Rolph, some leading macro indicators — like CEO sentiment, manufacturing data and insider selling — are showing “deterioration.” That, coupled with a decadelong bull run that has seen strong gains this year, could be a warning sign for investors, in Rolph’s view.
In response, Rolph is adopting a more defensive stance in his asset allocation strategy. That includes reducing equity exposure and investing more heavily in fixed income. Make sure to listen to the full episode for more details on Rolph’s stance.
From IBD’s perspective, the current stock market is in a confirmed uptrend. Investors should consider maintaining a bullish stance until heavy selling in the broad market, known as distribution, starts piling up. And as always, keep an eye out for sell signals in your individual holdings.
Managing Market Risk For Wealth Protection
Most investors focus on market risk when managing their investment portfolios. To combat volatility in the current stock market, Rolph recommends basic risk management strategies like diversification. He says investors should have proper asset allocation and look at how different securities correlate.
In addition to market risk, Rolph says investors should pay attention to operational and illiquidity risks when assessing potential investments.
Rolph and IBD podcast host Irusha Peiris also analyzed three stocks: Brookfield Asset Management stock, CVS stock and Focus Financial stock. As always, these discussions are for informational and educational purposes only.
Furthermore, this analysis should not be considered a recommendation to buy, hold or sell any security. Consult with your financial advisor before making any investment decisions. You can read Rolph’s disclosures in full by visiting the Miracle Mile Advisors website.
Brookfield Asset Management Stock
Rolph says that Brookfield Asset Management stock appears to be a good value at the current price. He says the Canadian company has had success in creating healthy returns on its investments.
Also, Brookfield charges fees on top of their investments to increase revenue. The asset management firm also has taken advantage of the low global interest rates to further increase returns, Rolph says.
Rolph says CVS stock is an example of a potential value play in the current stock market. Although CVS stock has seen a four-year downtrend, the retail chain has invested heavily in health care delivery services. A partnership with UPS will also allow future drone deliveries of prescriptions.
“They are definitely doing all the right things to put themselves as the primary competitor to Amazon (AMZN) in this space,” Rolph says.
Focus Financial Stock
Focus Financial stock represents the growth of independent financial advisors in the industry. Rolph says the value of Focus Financial stock comes from how the company structures their investment deals. “They buy a percentage of the cash flows with a preference,” Rolph said. This means that the company can profit off growth and is protected from future market downturns.
Additionally, Rolph says the profitability of Focus Financial stock may to continue to go up, especially if the stock market continues its current growth rate.
Top Stocks To Buy And Watch
If you’re looking for the next top stocks primed to make big moves, check out IBD’s Stock Lists page.
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