From time to time we get a financial market report from one of our friends on the Street. Lori Basra, whom I got to know back in the day when she broke in with Babson’s and I covered the market for a newsweekly, has always been a savvy guide for the retail investor. Last year the veteran analyst was honored by the North American Securities Association as one of thirty leading women in finance. I asked Lori whether she thinks this is a good time for risk-averse retirees to dip their toes in the pool. I also wondered what her favorite stock is. Here’s what she said. — DL
The market took a terrific hit but rebounded in record time. The economy will take a long time to recover, and so you’d have to say that the market has gotten a little ahead of itself. But you aren’t getting any interest on your cash and money-market accounts, and you might want to harvest your losses — sell shares where you have a loss to lower your AGI on next year’s 1040. With the cash thus generated, you might want to buy some blue-chip stocks at a discount: American Express, Merck, Coca Cola, J. P. Morgan are all well off their highs and excellent long term investments. Fidelity Select Health is also a winner.
For the nervous, the purchase of Berkshire Hathaway B shares is possibly the safest, most conservative stock investment you can make. Warren Buffett has a lot of cash and there will be companies in distress that he, Charlie Munger, Todd Combs, and Ted Weschler can rescue — or slay with his fabled “elephant gun.” These guys are the ultimate value investors, and value investing has been out of favor for a decade, but it will come back, it always does. Nobody ever lost money betting on Warren Buffett.
For the long term I favor technology, the big names (Microsoft. Apple, Alphabet) and the start-ups. A good ETF like Vanguard’s Information Technology (VGT) or Invesco’s QQQ are ways to own the sector. I guess Amazon is my favorite stock.
Never give in to panic. Better to do nothing than to sell on the day of a market crash. Now that trades are free, you can nibble — buying 5 or 10 shares at a time — which gives you the pleasure of a casino player at little risk: dollar coast averaging on a daily basis. >>>
Thank you, Lori. — DL
Note: “AGI” is adjusted gross income and “1040” refers to the tax return due usually on the fifteenth of April. (Not this year; the deadline for returns and estimated tax payments has been postponed to July 15.) “Dollar-cost averaging” refers to the statistical advantage of buying shares in regular increments rather than all at once. The subject is examined in Carey and Morrison’s Eight Wonders (1991), which takes its title from Einstein’s observation that compound interest was the “eighth wonder of the world.”