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The legendary analyst presented a list of companies he would now avoid like the devil. Do you own any of them?

Jamie Cameron
16. 10. 2022
6 min read

Analysts are shooting around tips on stocks that can make incredible percentages, protect you against inflation or benefit from a recession. But what about stocks that could put your portfolio at risk in this situation? Here are five such - don't you own any of them!

Could these stocks really threaten your portfolio?

Of course, I could rattle off a few options that I consider quite inappropriate for a situation like the one we are in. Let's leave out the fact that my strategy is really long term and therefore every stock I own I should be able to defend and not sell in my portfolio. But that's for another discussion.

It is for this reason that for this article I borrowed five stocks from well-known analyst Matt Krantz, who you may know from various financial websites, Twitter, YouTube and as a textbook author. We'll take a closer look at each of these stocks.

Stocks that suffer during a recession

In general, we'll focus here on stocks that are typical victims of a recession - the situation that's probably bothering us the most right now.

But you might not think at first glance which titles might be suffering.

Specifically, then, somewhat surprisingly, Boeing $BA+1.3% and energy firms Baker Hughes $BKR+1.8% and Halliburton $HAL+0.4% have underperformed the S&P 500 in each of the last five recessions. All have underperformed the S&P 500 in each of the five recessions since 1980. Krantz mentions these three and considers them dangerous. Precisely because they look like logical good choices.

Boeing specifically has already been punished quite a bit by the market. But can it get any worse?

Beware, this could be an investor trap according to many experts! For it is precisely these sectors that many investors are now rushing into - precisely because the likelihood of a recession is growing.

Of course, the Fed, which is promising an aggressive cooling of the economy, has a hand in this. Investors are bracing themselves for short-term interest rates to jump into the 4.25%-4.5% range by the end of the year. According to the CME FedWatch Tool, the probability of this is 58.3%.

And when rates rise that fast, a recession usually follows. The data shows that in six of the seven cycles when interest rates rose this fast, a recession occurred - on average, less than two years later.

The greatest chance is currently attributed to the 425-450 basis point range. Source

In general, the Fed has been criticized by many investors for its actions. Among the strongest critics of the current "brake/gas" style is Stanley Druckenmiller, who has repeatedly urged the Fed not to be a roller coaster. Read more here:

Don't invest, don't give a damn. Nothing will happen for 10 years now, famous billionaire discourages investment

The Federal Reserve has made four interest rate hikes so far this year and is likely to raise them further to tame inflation. It looks like the next hike will be another 75 points.

Druckenmiller describes their behavior as on a seesaw. From extreme to extreme. First brutal money printing and then the brakes stepped on (in the form of extreme tightening).

That was a bit of a digression, let's move on. Again, let's look at a bit of statistics. Investors usually do one thing in recessions: They sell stocks in the S&P 500. But not as much as one might think. Since the recession that began in 1953, there have been 11 recessions in the United States . And the S&P 500 has fallen an average of 2.1% during them.

List of US recessions since 1958, according to Wikipedia. Source:

And as I mentioned above - However, some stocks in the S&P 500 are particularly vulnerable during recessions .

Let's go back to Boeing. That particular one is doing the WORST of any market in the recession. Over the past five recessions, the stock has fallen an average of 40.1%. That's the worst performance of any stock in the S&P 500 over that time. It's also surprising because Boeing typically has a large backlog of aircraft orders.

Another trap may be energy, which (even here on the web) has been extremely popular lately. No wonder. There are some really big names investing in energy and oil companies. Even Buffett himself doesn't seem to have had enough of the last six months.
But Krantz's opinion stands against them: Many of these stocks have suffered badly in the recession.

Halliburton, for example. It's a popular stock this year, up about 28%, because it supplies the equipment needed to extract expensive fossil fuels. But in previous recessions, you didn't want to own it in spite of that. In the last five recessions, Halliburton's stock has fallen more than 40% on average. And it could get worse. Halliburton shares lost more than half their value in the last recession.

On the other hand, energy companies (let alone secondary suppliers) still seem like a pretty good bet. But history doesn't play into Halliburton's hands.

A green chart is quite rare lately. It could turn around, though.

And so is Baker Hughes, which is also an equipment supplier to energy companies. Its stock has fallen more than 30% on average in the last five recessions.

That could be a bit of a slap in the face for investors who have been rushing into energy company stocks. They are generally thought to be a good bet during inflation. The Energy Select Sector SPDR Fund $XLE+0.1% has gained 46% so far this year. And the Utilities Select Sector SPDR Fund $XLU+1.0% is down only 6%. Which is a luxury performance compared to the SAP500.

Further, Krantz called out two other stocks in the sector as dangerous. Specifically Schlumberger $SLB-0.2% and American Electric Power $AEP-0.3%, for which he fears similar problems to those I described in the previous paragraph.

So far, Schlumberger has outperformed the market
AEP, on the other hand, has hit a wall

What is your view of these arguments? Do you think he is wrong or could he be right? Alternatively - will the problem affect the whole market or is it only the "weak pieces" that will be punished more?

If you enjoy my articles and posts, feel free to throw a follow. Thanks! 🔥

Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and a few other analyses. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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