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Don’t let the volatility ‘scare you out of stocks’: Market veteran reveals what to buy right now

With Wall Street mired in the depths of a bear market, some investors are wondering if it’s time to flee stocks and hide in cash . But market veteran Nancy Tengler is unequivocal that investors should strap in for the long term. “Bear markets are no fun. But we do know that every bear market is eventually followed by a bull market and the trick is not to let the market volatility scare you out of stocks,” Tengler, who is CEO and chief investment officer of Laffer Tengler Investments, wrote in a note on Oct. 11 She believes investors should seize the opportunity to put money in the “highest quality names” amid the current market weakness. “I’m not saying the market can’t go lower. I think it can. But typically, when you look back at periods like this, it has always been a good time to commit capital in a very disciplined manner. Not in any hurry, but much like how you invest in your 401K — a little bit now and a little bit later. You just buy the highest quality names, many of which are on sale right now,” she told CNBC “Street Signs Asia” Thursday. Tengler, a proponent of dividend growth strategies for more than three decades, believes this is a “great time” to own companies that are growing their dividends in a sustainable manner. Her firm uses what’s known as a relative dividend yield (RDY) strategy to judge the value of a stock. A high relative dividend yield is a buy signal if the dividend level is expected to be sustained and increased over time. “RDY is unique because the relative nature of the RDY metric allows us to invest in fallen-angel growth companies who are committed to growing the dividend as a portion of long-term sustainable earnings growth,” Tengler explained. “The beauty is we get paid to wait for the fundamentals to improve in these companies with the potential to grow faster than the average value stock.” Stock picks One of her top picks is Amazon — a stock she thinks investors should own for its cloud business. Tengler said U.S. tech giant is growing its cloud segment at a rapid pace, while the company has also been able to increase its advertising rates. She acknowledged there could be some near-term volatility for the stock given competition from Target and Walmart , but said this could provide opportunities for investors to accumulate a position in Amazon for the longer-term. Tengler believes the wider tech sector will benefit from projected higher spending in software, with Microsoft likely to be the biggest beneficiary. “I think there are a lot of opportunities to pick away at some of these names in a responsible fashion. Don’t chase them, but be mindful of the fact that the future and reliability of their earnings growth is very powerful. And that’s going to be of interest as we enter a recession and earnings growth slows down,” she said. Read more Is Meta a stock to buy or dodge? Two tech investors face off The market for EV tech is revving up — and it’s a good time to cash in on these stocks, Citi says Goldman Sachs favors Tesla and another big automaker even during an economic slowdown Tengler also likes Home Depot , which she described as “highly reliable” and which has a growing dividend that currently stands at 2.7%. “If you can get 17% annualized dividend growth, as Home Depot has produced over the last five years, that’s a pretty good hedge against inflation. You’re getting paid to wait for things to turn around,” she said. Rounding off her list is Illinois-based biopharmaceutical firm AbbVie . The company has a dividend yield of about 4% and an annualized dividend growth of 17% over the past five years, according to Tengler. “It [belongs to] a defensive sector that can serve as a barbell against some of the riskier elements of your portfolio, like consumer discretionary and technology, which we think it’s time to start adding back into those two sectors. [AbbVie] provides a balance against that volatility,” she said.

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