One market strategist said that investing in quality companies is something that will pay dividends over time despite short-term pain.
Baird Strategist Michael Antonelli said on Yahoo Finance Live that the focus on quality stocks seems to have fallen by the wayside in 2022 as investors fret about a potential recession, as a result of an inflation-fighting Federal Reserve.
The S&P 500 is down around 13% so far in 2022, while the Dow Jones Industrial Average is off by 9% and the Nasdaq Composite has fallen by about 19%.
Antonelli suggested that investors should ask if there are companies out there that just got caught up in this whirlwind of selling during times like 2022.
He said that companies like Apple are executing their business plans really well. The reason why these companies are so good is because they have so many people trying to solve problems. They are so great, and that's why they're so great. The tide could turn for shares of high-quality companies that fall under catalyzed investment themes, according to strategists at Citi.
The market has been deservedly focused on a mix of macro risks and influences this year, according to Scott Chronert, Citi strategist. As we move closer to recession resolution, the longer-term growth profiles associated with many themes may provide some performance edge, particularly on the heels of year-to-date valuation corrections. A new trading environment may mean stock-specific valuation catalysts may be more closely tied to fundamentals and may cause a lower expected growth profile and less central bank accommodation. Chronert outlined six compelling investment themes: automation robotics, internet-driven business models, artificial intelligence, emerging market consumers, top brands, and net zero.
Apple, Microsoft, and Disney are a few of the names highlighted by Citi's strategists as quality thematic plays.
Apple and Microsoft's share price is down by 7% and 16% year to date despite tech giants reporting solid sales growth in the second quarter and showcasing billions of dollars in excess cash flow.
The stock of Disney is down 29% on the year despite the travel momentum indicated by second-quarter results from Marriott, Airbnb, and Hilton.
Brian Sozzi is an anchor at Yahoo Finance. Sozzi follows BrianSozzi on Twitter and LinkedIn.