Inflation is one of the biggest concerns of investors. If prices continue to spiral out of control, the Fed is likely to continue raising interest rates aggressively – which is not good for stocks.
When the latest inflation report came out on Tuesday and consumer prices rose 8.3% in August from a year ago, stocks collapsed. The S&P 500 ended the day at 4.3%, the Dow fell 3.9%, while Nasdaq Composite plunged 5.2%.
Still, investment mogul and Shark Tank star Kevin O’Leary doesn’t believe it’s time to run for the exit.
“It’s very discouraging for the stock markets to lose nearly 1,000 points in 40 minutes,” he told CNBC.
“That means volatility is back. If you’re an investor, it might be best here – since you can’t guess the bottom – to grab opportunities on days like today and buy stocks you think are attractive.”
Here’s a look at what Mr. Wonderful now likes.
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Beaten up chipmakers
The semiconductor industry had a strong bull run in 2020 and 2021. But in 2022 it will radiate a very different atmosphere.
Year-to-date, the iShares Semiconductor ETF (SOXX) is down 35%. Many chipmakers have fallen deep into bear market territory.
O’Leary sees an opportunity in this segment.
“If you buy Broadcom, say nearly three and a half percent dividend, it’s crushed by the semiconductor correction,” he says.
“Nvidia, same thing, crushed, absolutely crushed.”
Broadcom shares are down about 23% in 2022, while Nvidia lost an even more painful 56% over the same period.
But things are moving in the right direction for these two companies.
In Broadcom’s fiscal third quarter, it generated $8.46 billion in total revenue, up 25% year-over-year.
In Nvidia’s last fiscal quarter, revenue rose 3% from a year ago to $6.70 billion.
“These supplies have been decimated, and yet they are still growing, they are still needed,” O’Leary noted. “The whole idea that we don’t need semiconductors anymore is ridiculous.”
Chinese internet stocks
Chinese stocks are another unfavorable group in the current market. The ongoing tension between the US and China has made these US-listed names extremely volatile.
But O’Leary is optimistic about the country’s potential.
“If you’re looking for long-term secular growth, there’s no doubt that China’s economy will become the world’s largest economy in the next 20-25 years,” he says.
“There is an economic war, technology war, regulatory war going on with the United States — that too could be temporary.”
O’Leary puts his money where his mouth is.
“I own Chinese stocks. I have an index of them, especially global internet giants, big companies like Alibaba,” he says.
Alibaba shares had a rough ride – they’re down 25% so far and a whopping 43% in the last 12 months.
And that could give contrarian investors something to think about.
“If you own Amazon, why don’t you own BABA – same idea.”
O’Leary goes on to explain that the political issues surrounding Chinese stocks – such as the threat of delisting – are just “noise”.
“To have no allocation to the world’s fastest growing economy … is crazy.”
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This article provides information only and should not be construed as advice. It comes without any kind of warranty.