Federated Hermes’ Phil Orlando is putting money to work in coronavirus battered stocks.
The firm’s chief equity market strategist started buying large-cap domestic growth names on Monday night, hours after the Dow fell 1,031 points.
“This is an area that we took profits in at the end of last year. With the broad market down 8%, a lot of the stocks in this category have been down 15% or 20%,” he told CNBC’s “Trading Nation” on Wednesday. “If we’re looking out until the end of this year and into 2021, a lot of these stocks are offering terrific value.”
However, it doesn’t mean he believes the market is in the clear.
Orlando, who’s one of Wall Street’s biggest bulls for 2020, believes the coronavirus fallout could slam stocks for months.
“We think the life of this pandemic might be three to six months. Remember, this started back in December. Now the news is going to get uglier,” Orlando said. “But as we get to the middle of the year, I think we’re going to see the trajectory of this thing peaking and rolling over.”
Orlando may be a long-term optimist, but he had a major pullback in his forecast before the coronavirus outbreak. Late last year, he told “Trading Nation” that market valuations were stretched, and he expected the record rally to pause. He took steps to protect his assets by increasing cash.
‘Smack in the middle of it’
“We had a tremendous rally in the stock market. We were anticipating perhaps a 5% to 10% air pocket,” he said Wednesday. “Here we are smack in the middle of it.”
The Dow is down more than 2,000 points over the past three sessions. On Wednesday, the Dow and S&P 500‘s early rally failed before the close. Thursday’s futures prices were down more than 1%.
“Our view is that we’re going to take some pain here in the first quarter and the first half,” Orlando said. “But then we see a nice rebound off of a very slow pace of growth in the second half of the year into 2021, and investors begin to price that in.”
Orlando has an S&P 500 year-end price target of 3,500, a 12% gain from Wednesday’s close. His 2021 target is 4,000, which implies a 28% jump.