Want to beat the market volatility? A fund manager explains how

Published Sun, May 15 20227:34 PM EDT

Jordan Cvetanovski of Pella Funds Management names the companies to own in uncertain times, some of which did well during the global financial crisis and Covid. Speaking to CNBC Pro Talks last week, he noted that global headwinds are roiling the stock market — and some sectors are set to benefit. Stock exchanges are one such category of companies, according to Cvetanovski, chief investment officer and portfolio manager at Pella. "We own companies like CME , Deutsche Borse and a little company in the Netherlands called Flow Traders , who are market makers in ETFs and ETPs," he said Wednesday. "What happens in uncertain times is the volume increases, obviously, as people trade more, and the spread increases," he said. Such firms make money off the difference in buying and selling prices, which is called the spread. "Their best quarters, I would say, were Lehman and Covid," said Cvetanovski, referring to the market collapses during the global financial crisis in 2008 and the coronavirus pandemic. Instead of buying put options to protect their assets, investors can consider buying companies that will give them a dividend and do well during volatile periods, he said. Flow Traders' stock price rose around 22% as global stock markets were plummeting in late February in 2020, he said. It gained around 75% from the start of the Covid crash to early July, he added. Supply chain issues Another uncertainty in the market is supply chain bottlenecks, including those caused by the ongoing Russia-Ukraine war, Cvetanovski said. Canadian fertilizer company Nutrien could perform well in such an environment because the potash and fertilizer market is likely to be tight for a long time, he said. "Very good for a company like Nutrien now, which has very low marginal cost of around $60 and they're selling it at $800," he added. In times of uncertainty, it comes down to "a bit of thinking and a bit of diversifying risk," said Cvetanovski. "Placing a few bets in places where you think, as best as you can, you're seeing some predictability of earnings." He said he sold banks and property companies when mortgage defaults rose before the global financial crisis, and got out of the market when reports of China building field hospitals emerged at the start of the Covid pandemic. Not buying banks On the flip side, Pella Funds Management doesn't currently own any banking stocks, Cvetanovski said. "We don't hold any banks anywhere, because generally you would be buying banks as interest rates go up. But generally, interest rates go up because the economy is so strong. We don't have that now," he said. Interest rates are rising because of inflation and not because of good economic performance, he said. "For [banks], it's not a great proposition, so the banks are not on our radar at the moment," he said, adding that he would be "extremely cautious," especially given the debt in the property market in some countries such as the Netherlands and Australia.

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CNBC Pro Talks: Where one fund manager is putting his money during the market madness

Pro Talks

Jordan Cvetanovski of Pella Funds Management names the companies to own in uncertain times, some of which did well during the global financial crisis and Covid.