Stay away from commodities and companies ‘gorging on debt’: Portfolio manager

Markets are “sour and grumpy” and investors should sit tight and protect their portfolios from risk by avoiding commodity stocks, Barry Schwartz, Chief Investment Officer and portfolio manager, Baskin Wealth Management tells BNN.

“It’s possible this big China growth story is over and if that’s the case you don’t want to be in the commodity space,” he tells BNN.

Commodity stocks – particularly in the metals and mining space have been hit hard by slowing Chinese growth. Shares of global mining giant Glencore have been cut nearly in half over the past month as investors worry persistently low commodity prices will cripple the company’s debt-laden balance sheet.

“Don’t buy things like Glencore, don’t buy companies gorging on debt. Stay away from companies in the commodity space,” he says. “These companies may be the best managed in the world but they have no control over the commodities they sell.”

Baskin recommends investors focus on companies selling goods and services that consumers use every day. Investors should also be wary of companies with high dividends – and instead should focus on companies with lots of free-cash flow.

Investors who are frustrated by negative returns in their portfolio should avoid unnecessary trading to try to boost their returns, says Baskin.

Investors need to diversify their portfolio and then sit on their hands.

“Inaction is the best action when markets are sour and grumpy,” he says.

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Monday, September 28th, 2015 EN

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