Semiconductors and growth stocks have fallen this year, bonds are underwater, and even the S&P 500 is in a bear market. It’s a tough picture for many wallets. So how should investors bear such large losses? Speaking to CNBC’s “Pro Talks,” Brian Arcese of Foord Asset Management said investors should sell any underperforming stock as soon as they realize they’ve made a “mistake” in their portfolio. “You have to look at each stock individually,” said Arcese, who manages two funds overseeing more than $1.6 billion in assets. “If you don’t think the business model of some of the meme stocks, like a GameStop or an AMC, is sustainable, then no matter what happens in the short to medium term, you better go out and buy a business that you believe in.” According to the portfolio manager, many investors hold onto loss-making positions experiencing “emotional pain” in the process. “I think it’s more behavioral than anything else.” Investors are also “worried” about losing the rebound rather than stepping back and reassessing the companies they own, he added. Arcese said he would consider keeping an underperforming stock if the company changes its management team or is willing to restructure and turn around the business. “But if nothing has really changed, then it’s very difficult to be fully convinced. [stock]“, he added. The stock markets in 2022 have been mean to investors of all stripes, whether hedge funds, billionaire family offices or securities traders. More than 85% of Hedge funds and billionaire investors, on average, have lost 18% this year, according to CNBC Pro’s analysis of data on 271 funds from Investing.com.As shown in the chart below, 232 funds have lost weight. value this year, with 11 funds down more than 50%.Kora Management and Spruce House Investment Management have lost more than three-quarters of their assets by value, with the latter bearing a third of those losses in the past month. “The best investors in the world are probably right 60-70% of the time,” Arcese told CNBC from Singapore. “That means everyone is investing, at least a third of the time, in a business that isn’t working. for some reason." Much of the d Their pain can be avoided, according to Arcese, if investors buy only “quality companies” with large management teams offering good returns and strong fundamentals. Stock picks The fund manager named three stocks that “will, in some way, work in any type of economic environment” – UnitedHealth Group, Air Products and Freeport McMoRan. Shares of all three companies are likely to be hit by a recession, Arcese concedes, but they are likely to outperform “deep cyclicals” such as semiconductors and the broader market. UnitedHealth, a U.S.-based healthcare and insurance company, has a buy rating of 16 out of 19 analysts covering the stock since Oct. 14. The median price target of analysts polled by FactSet is $597.5, indicating upside potential of 10.3% from current levels. Air Products, an industrial chemicals company, is an inflation hedge and an “incredibly defensive company,” according to Arcese. “They have increased their dividend for 40 consecutive years. They have contracts with inflation clauses with their customers that last 15 and 20 years,” he added. Meanwhile, Freeport McMoRan, an Arizona-based copper mining giant, is a “low-cost” producer of a commodity the world lacks, according to the fund manager. “If you believe in the energy transition, in green energy, the world doesn’t have enough copper to get us there,” he said. Six of 12 analysts covering the stock have rated FCX as a “buy” since its third quarter results. Shares of the company have fallen 21% since the start of the year, mainly due to copper prices.
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