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Wealth Management
Changing dynamics: Money managers shift toward value and overseas stocks
Tom Moran
Moran Edwards Asset Management Group /
Wells Fargo Advisors
Naples
From the West Coast of Florida, Tom Moran has been managing the finances of wealthy clients for 30 years. This year, he has an even greater bias toward equities and a new emphasis on value stocks over growth stocks. When selecting value stocks, he is broadening his scope to include more mid- and small-cap stocks, expecting them to benefit from tax reform. He looks for companies with strong balance sheets, low debt and low priceto- book ratios. “That’s my definition of value stocks,” he says.
His selections include almost all sectors, although in the tech sector he veers away from larger multinationals that he considers overvalued. “This year, we are putting less emphasis on high-dividend stocks like utilities and moving toward the second quintile, stocks that are paying 2% or 3% rather than 4%. Maybe we can make it up with growth opportunities.”
For those clients who can tolerate more risk, his strategy for 2018 includes index funds that represent a portfolio of stocks in countries such as South Africa, Indonesia, Colombia, Taiwan and Brazil. For more conservative clients interested in international diversification, he recommends more developed countries such at the U.K., Germany, Japan and Switzerland.
Moran continues to keep bonds in clients’ portfolios but won’t add more this year unless the durations are short or the bonds are convertibles. “If you’re looking for growth, you are not going to find it in fixed income,” he says. “We’ve reduced our exposure to long-term maturity bonds because there is not enough return for risk. I think we will see low or negative rates of return after taxes and inflation.”
Other alternative investments in his 2018 strategy are precious metals, timber and currency.
Moran views this year as a particularly challenging year. Equities are no longer cheap. Prices are volatile, and getting returns on fixed income is a challenge as interest rates rise, he noted.
USF: Financial Planning Degree
The University of South Florida’s Muma College of Business is using a contribution from Raymond James Financial to support the college’s new personal financial planning degree program, which began offering courses in fall 2017. The investment and planning giant recently made a $200,000 donation to the program, which is under the directorship of Laura Mattia.
Chris Conner
Managing Director /
North Florida Wealth Advisors
Gainesville
Chris Conner’s telephone has been ringing. His clients want to know whether to invest in bitcoin. “I tell them it’s a bubble and I believe it will end badly.” Instead, Conner embraces a long-term, goal-oriented investment strategy. He prefers large-cap, dividend-paying stocks with good management teams. This year, those stocks are in industries that include building materials and engineering. He has started looking at investments overseas, particularly emerging markets. “We think that’s where there will be growth.” Conner says he is scouting for emerging markets funds that might have an up-and-coming airline in Latin America or an upstart business in Turkey. His approach is buying a basket of those stocks selected purposefully by fund managers. Some could be dividend-paying stocks.
Conner also invests in technology and biotechnology stocks through funds in which he trusts the manager. “It is not my job to guess which stocks will do well. I leave to professionals to buy a basket of them. If one goes down, it is still OK. I have to be defensive when I’m dealing with clients at or near retirement.”
Conner says he also includes cash in the portfolios he manages, and in 2018, he only will purchase bonds as a package that includes some “good quality” corporate bonds. Like most money managers, Conner noted the possibility that geopolitical actions could affect the U.S. economy, which is why his clients have individual goals and are saving and investing toward them. “They are not caught up in the day to day.”
Linda Lubitz Boone
Founder / President
Lubitz Financial Group
Miami
After determining the rate of return a portfolio needs to earn, Lubitz Boone, a certified financial planner, chooses an asset allocation that will support it. Apart from stocks and bonds, that portfolio this year will include real estate, reinsurance funds and other alternative investments. She is including reinsurance funds because what happens in the stock market has nothing to do with the amount of premiums property insurers receive, she says. “We are hedging our bets, and these funds have grown nicely over time.” Another alternative investment Lubitz Boone likes for 2018 is currencies, specifically funds that invest in a range of currencies around the world.
For some retired clients, she is advocating taking equities gains this year and putting them into a short-term certificates of deposit or a money-market account with a monthly distribution. “My clients need to be in a position where they don’t have to sell at a time when it’s not opportune,” she says.
She is also investing in the Russell 1000 and considers it a less risky alternative to buying individual stocks. For someone who is focused on short-term growth, Lubitz Boone recommends emerging-markets mutual funds. However, she is bullish on U.S. equities, mostly because companies are becoming more profitable. She believes any market corrections this year are an opportunity to snap up shares of good stocks at lower prices as long as you are not already overweighted on stocks.
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