When looking for companies to invest in for this category, the balance sheet is an important sign in determine how well a company is doing, Jonsson said. Many growth companies did well because money was free so they could raise equity at attractive valuations. However, when the model changed, those dependent on external financing had to change their business model because they have to be profitable, Jonsson said.
The third category, which is at the bottom of her portfolio, are more experimental stocks or companies that Jonsson might be trying out for the first time. Whether she keeps these stocks or increases her position in them depends on how they react to the markets, she said.
Jonsson likes investing in healthcare because she described it as the golden age of healthcare due to the breakthroughs the industry is working on in trying to find cures for obesity and dementia. Capital has invested with a number of companies that have made significant strides in helping to cure obesity, according to Jonsson.
“If you cure obesity, you solve so many other problems in the healthcare system, so I’m very bullish about that,” she said. “Those are companies that can be both offensive and defensive.”
Other sectors that make up her supertankers section includes healthcare suppliers as well as insurance companies. She also looks at Asian-based stocks and non-bank financials like exchanges.
Gitlin had several suggestions for investors on the fixed income side of the business. Initially investors should get out of cash because they are losing money by not investing it, he said. As an example, an investor can own short-duration high quality bond strategies that can yield 150 basis points more than cash, Gitlin explained.
“Don’t get stuck in cash,” he said. “It’s a good place to sit and then transition to and execute your investment plan and become more active.”
He also suggested that investors fortify the core of their portfolio and for bonds that means the U.S. aggregate, which is the largest portion of the market. Currently the yield on a core bond is just under 5%, he said.
Investors should also look into the credit markets, however given the different types of credit markets available and their varied success rate, Gitlin suggested investors diversify among the different strategies. Finally, municipal bonds are always a reliable investment option, despite the difficult year they have had, he said.
“For tax-aware folks the taxable equivalent yields in munis is attractive so at the highest tax bracket relative to taxable you are able to pick up 100-200 basis points depending on the strategy you’re on,” Gitlin said. “In addition, the year after a really tough year for munis … munis over the next five years tends to be quite positive.”
Looking ahead the portfolio managers urged investors and advisors to stay active in the markets. The amount of assets in cash indicates that a lot of people are still scared to enter the markets, Gitlin said. He encouraged people to get off the sidelines and get invested.
“Get invested or stay invested if you’re not,” he said. “It’s about positioning your portfolio for the long-term and it’s really easy on the backdrop of a bear market and losses to hibernate.”