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How to Play the Rising Volatility: Stock Picker

Thursday, 12 Aug 2010 | 3:19 PM ET

The CBOE Volatility Index (VIX), the widest gauge of fear in the market, spiked 15 percent on Wednesday, closing above 25. Is volatility back in the stock market and how should investors play it? Jim Lacamp, portfolio manager and advisor at Macroportfolio Advisors, and David Katz, chief investment officer at Matrix Asset Advisors, shared their insights.

“I like the VIX index a lot as a hedge,” Lacamp told CNBC. “Traditionally, this time of the year, we had an air pocket in the market so it’s particularly compelling, but if you look at it as a hedge…it’s better than having a long-short strategy and even better than having cash.”

Lacamp told investors that he expects fear to rise “more dramatically” as markets continue to see selloffs.

“We’ve seen financials break down, semiconductors break down and economic data has been disappointing,” he noted. “So it’s a good hedge in a troubled market.”

'Very Good Place to Make Money'

In the meantime, Katz said investors should use the VIX to buy stocks.

“Stocks are at 11 times earnings—you can get zero percent in a money market and two percent in bonds—so we think stocks are very good alternative investment," he said.

"If you have a 12-month time horizon, stock are going to be a very good place to make money,” Katz continued. “But by the time we have clarity that the economy is not in a double-dip, stocks are going to be a whole lot higher.”

Katz Likes:

Corning

Johnson Controls

JPMorgan Chase

Zimmer

Staples

Lacamp Likes:

iPath S&P VIX

iShares MSCI-Singapore

Market Vectors Gold Miners

Quicksilver Gas

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Scorecard—What They Said:

  • Lacamp's Previous Appearance on CNBC (Aug. 11, 2010)
  • Katz's Previous Appearance on CNBC (Aug. 2, 2010)

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Market Views—Across the Board:

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CNBC Data Pages:

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CNBC Slideshows:

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Disclosures:

No immediate information was available for Katz or Lacamp.

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Disclaimer

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