Strategist likes this defensive FAANG stock heading into September
U.S stocks fell on Monday, extending a losing streak from last week, but there could be more pain ahead as the stock market heads into what has traditionally been a “seasonally weak” period for equities. But strategist King Lip is not overly worried. “We are going into a seasonally weak period for stocks, so we expect the market to tread water. We think any incoming data that suggests inflation continues to moderate is going to be well received by the market,” Lip, chief strategist at BakerAvenue Wealth Management, told CNBC “Street Signs Asia” on Monday. “More importantly, we don’t believe we will break the June lows,” he added, referring to the stock market’s precipitous decline to its lowest level back in mid-June. Staying defensive Nevertheless, Lip is staying “defensively postured.” “In an environment where there’s so much uncertainty right now, we like high quality, we like defensiveness in companies that reported earnings recently and raised estimates,” Lip said. One defensive stock that he likes is Apple . The tech titan has emerged relatively unscathed from this year’s bear market run. The stock has lost about 11% of its value this year, beating its peers within the FAANG grouping as well as the tech-heavy Nasdaq Composite. Apple was also the only FAANG stock that beat on earnings and revenue in the most recent earnings season, as it delivered earnings per share of $1.20 and revenue of $83 billion for the fiscal third quarter. Read more Warren Buffett loves this stock. Morningstar is more bearish and thinks it should be trading lower Tech investor Paul Meeks reveals one chip stock he’s steering clear of — ‘even on the dip’ Goldman Sachs says the world is at an ‘inflection point’ and it’s time for a new investing playbook While Apple did not provide formal guidance for the quarter, analysts expected the company to give fourth-quarter guidance of $1.31 in earnings per share and nearly $90 billion in sales. “In terms of an outlook in the aggregate, we expect revenue to accelerate in the September quarter despite seeing some pockets of softness,” Apple CEO Tim Cook told CNBC’s Steve Kovach. Not just a defensive stock The company is slated to unveil its latest product line-up on September 7, with updated iPhones, Apple Watches and more expected to be announced — an event that will be “a catalyst” for the stock, according to Lip. He says consumers are likely to upgrade to the new items, given that their existing products are likely to be a couple of years old now, and “it’s a good time to be upgrading to those types of new innovations.” But Apple is not just a defensive stock. It is also growth oriented, according to Lip, with the company likely to benefit as inflationary pressures ease. An easing of inflationary pressures would imply a cap on the U.S.10-year treasury yield , which has more than doubled from 1.5% at the start of the year to its current level just above 3%. The rising yield has pressured stocks, particularly growth and tech names that don’t fare as well in a high interest rate environment. But Lip believes the 10-year yield is unlikely to overshoot 3.5% — a scenario in which he says Apple will “do very well.”
