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Portfolio > Portfolio Construction

Bob Doll's 5 Themes for Stock Investors for 2020

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Buy American. That’s one of several investment ideas Nuveen’s Chief Equity Strategist Bob Doll is recommending for the next 12 months.

Doll says he favors U.S. companies that conduct most of their business domestically because U.S. economic growth tops the growth of most other developed economies, in Europe and Japan, and of emerging economies.

He describes his outlook as anti-multinational because those companies are not only more susceptible to slowing growth outside the U.S. but also subject to the vagaries of the ongoing U.S.-China trade war.

Unlike many other market strategists Doll does not expect the U.S. economy will slip into recession this year or next — 2021 is his forecast — and he is avoiding most defensive sectors, favoring instead companies that benefit from the current economic cycle, as the expansion continues though growth has slowed.

For those investors who want to hedge risk, Doll recommends absolute return products that include long and short positions.

He expects U.S. GDP will slow to around 2% this year, down from 2.5% in 2018. Longer term U.S. economic growth will remain closer to 2% than 3.2% that has prevailed since after World War II because of demographics. Fewer births mean fewer workers, which would help boost productivity.

Doll has five themes for stock investors over the next year. In addition to favoring U.S. companies, he recommends:

  • Companies that benefit from the mature phase of the economic cycle
  • Companies with positive free cash flow that reinvest in their businesses before raising dividends or buying back stocks. “Show me organic growth because growth is harder to come by in a slowing economy. Companies that can grow will fetch a premium.”
  • Companies that benefit from a healthy U.S. consumer
  • Companies that offer “something special,” be it new products, new distribution of products or something else

Asked to name a company that satisfies all five criteria, Doll says he can’t. Among those stocks that satisfy several of those criteria, however, he offers Target, in retail; Apple and Microsoft in technology; and Discover Financial Services, Capital One, MasterCard and Bank of America in financials.

Doll doesn’t eschew defensive stocks entirely — and among them likes the biotech firm AbbVie and AT&T.

“Boringly neutral” is how Doll describes his stock market outlook.

He meets regularly with advisors and recommends that they educate clients about volatility in the market, so that they don’t panic when stocks fall. He also recommends that advisors don’t exceed their clients’ normal allocation to equities.

A client’s time horizon is key, says Doll, noting that holding more bonds and cash doesn’t make sense for investors in the long term.

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