Money Managers Talk Coronavirus Strategies

Money Managers Talk Coronavirus Strategies
  • The Coronavirus continues to spread worldwide and causing some anxiety among investors.
  • Investors can take this opportunity to shift allocation to low volatility names.
  • Cruise and airline stocks tend to rebound after similar health scares ease.
  • Stocks are just 2.5% removed from their all-time highs which implies the weakness is far from a correction.

Dan Draper is the global head of ETFs for investment manager Invesco and offered some tips for those who are concerned with the Coronavirus’s impact on the markets. He was joined by other industry professionals who offered multiple different viewpoints throughout Monday’s trading session.

Low Volatility Play

Investors have reason to be defensive and many are shifting away from stocks and into cash and Treasuries, Draper told CNBC from the sidelines of the ETF Conference in Florida. But investors who for whatever reason need to remain in equities should consider low volatility plays, including the Invesco Exchange/S&P 500 Low Volatility ETF (ticker SPLV).

The ETF includes exposure to 100 stocks from the S&P 500 index with the lowest realized volatility over the past year.

“If you need to remain invested in equities, low volatility is a consideration,” he said.

Look At Your Portfolio

Investors should take a look at their portfolio and seek out names that are likely to rebound exiting a global scare, Shannon Saccocia, Boston Private Wealth CIO, said on CNBC’s “Fast Money Halftime Report.” For example, history has shown cruise and airline stocks recover once an outbreak shows signs of easing.

Gilman Hill Asset Management CEO and Portfolio Manager Jenny Harrington added on the CNBC segment she also looks at her portfolio in times of volatility. Her portfolio consists of 36 different names, only six of which could be impacted by the Coronavirus. The remaining 30 names have minimal to no exposure which suggests anything China-related is unlikely to be mentioned in the upcoming earnings season.

“I think the vast majority of companies, broadly, are not going to be addressing this in their earnings,” she said. “And I think we will get that chance to step back, move on, and look at the bigger picture.”

Don’t Call This A Correction

By mid-Monday afternoon, the Dow Jones Industrial Average and other major indices were down roughly 1.3% and rebounded off session lows. According to Cerity Partners partner Jim Lebenthal, this type of reaction is far from a correction.

In fact, he added on the CNBC segment that major indices are merely 2.5% removed from all-time highs. Even if the gap from all-time highs doubles to 5% it will be viewed as “normal noise of any given month.” 

Lebenthal added that this brief drop is what many fund managers have been waiting for and an opportunity to “put money to work.”

By Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.
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