Actively managed funds have a better chance of outperforming the market, said Nancy Tengler, chief investment officer at Heartland Financial.
“Correlation between stocks are at historic lows, which argues for active management,” Tengler told CNBC on “Power Lunch” Monday.
After the financial crisis, the U.S. Federal Reserve started easing regulations, causing stocks to move together, Tengler said. This caused a rise of passive investing, where investors could put their money in an index and essentially do nothing, rather than having a fund manager pick individual stocks.
“But now the stocks are moving more in line with their fundamentals,” Tengler said. “When that happens it does matter which stocks you own.”
Uncertainties over the number of Fed hikes this year, wage and inflation pressures and retail sales that are “choppy” have all put “investors on edge,” Tengler said. The best course of action, she said, is selecting a fund manager to individually pick stocks.
“Volatility rules,” Tengler said. “That hasn’t happened in a long time, and I think the market is trying to make an adjustment.”
Here are a few of Tengler’s top picks:
Utilities
- Emerson Electric
- Technology
- Cisco
- Splunk, a data mining company based in San Francisco.
- Oracle, because “it’s cheap,” she said.
Pharmaceuticals
- AbbVie
- Consumer
- Home Depot
- Walmart
Tengler called those stocks “Amazon-proof.”
FedEx
Tengler said she remains bullish on FedEx, despite Amazon’s announcement this year that it would invest in its own delivery service.
“It takes decades to put in place the systems that FedEx has,” she said. “I don’t think Amazon can be everything.” She also pointed out that the tax reform is “hugely beneficial” to FedEx.
Banks/ financials
- J.P. Morgan
- Berkshire Hathaway