4 hedge fund managers offer advice on volatile market

Published Thu, Aug 27 201510:54 AM EDTUpdated Thu, Aug 27 201511:49 AM EDT

With markets gyrating hundreds of points up and down on a daily basis in the past week, many investors are wondering what they should do next. CNBC asked several hedge fund managers what advice they would give to the average investor during this extreme volatility. Here is what four of them said: 1) Buy and hold works: "Buy great companies at attractive prices and never sell." — Bill Ackman , founder of Pershing Square Capital Management, L.P. Ackman agrees with Warren Buffett, who wrote in the 1988 Berkshire Hathaway annual report, "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever." 2) Buy more because a U.S. recession is unlikely: Analyzing previous market cycles, Thomas Giovine of Giovine Capital is confident the U.S. will not enter a recession here, so he believes the market's pullback provides a great entry point for long-term investors. "Investors have an opportunity to buy and hold long term many businesses that are attractively valued and produce an attractive yield. The stock market is not a bank so don't risk funds you will need for expenses. However, for investors' retirement account and those who have extra money to invest, this is a great time to buy. The U.S. economy will continue to be supported by a multiyear tailwind associated with massive under investment in residential construction and significant reduction in household formation following the housing bust. Liquidity is still positive with lag effects of U.S. Federal Reserve stimulus and both the (European Central Bank) and the (People's Bank of China) easing. A U.S. recession is very unlikely: every recession (1929, 1937, 1958, 1960, 1970, 1980, 1990, 2000, and 2007) was preceded by either a spike in inflation or substantial Federal Reserve tightening both of which seem unlikely." —Thomas A. Giovine, president of Giovine Capital Group. He mentioned Home Depot , Lamar Advertising , Paccar and United Parcel Service as companies with attractive yields and valuations. Read More Four ways to play defense in a falling market 3) Stocks are still the place to be: Diamond Hill is known for its disciplined valuation-focused investment strategy. Ric Dillon manages the firm's $4.2 billion Long-Short fund. "From today's (Wednesday morning) beginning market levels, an investor who holds their diversified equity portfolio for five years should estimate an annualized total return of about 6 percent, which is likely greater than the annualized return from a 10-year Treasury note. The path of the market over the next five years may continue to be volatile, with 10-20 percent pullbacks (or greater) likely. Nevertheless, for the long-term investor equity returns will likely exceed returns from U.S. Treasury securities for the next five years." —Ric Dillon, CEO of Diamond Hill. 4) Focus on individual value stock opportunities: "My advice for this market is to step aside. After five years of central banks manipulating the prices of stocks and bonds around the world, it may take a while for prices to normalize. I believe it is likely the next five years are the opposite of the last five, which, if correct would say the opportunities are going to be in individual stocks and bonds and not in the broader indices. Look for individual value opportunities and stay out of the market for now." —John Fichthorn, portfolio manager of Dialectic Capital. Read More Following huge beat, buy Best Buy? Fichthorn, a noted short-seller, doesn't like the general market due to the after-affects of central bank interventions. He believes the best way to invest is finding specific cheap companies.

Bill Ackman at Delivering Alpha 2015 in New York.

David A. Grogan | CNBC

With markets gyrating hundreds of points up and down on a daily basis in the past week, many investors are wondering what they should do next.

CNBC asked several hedge fund managers what advice they would give to the average investor during this extreme volatility.

Here is what four of them said: