'Play offense, not defense': Analyst says buy the dip in these stocks

Published Sun, Feb 12 20238:25 PM ESTUpdated Sun, Feb 12 20239:23 PM EST

Markets are set to have "better than average" returns this year, after stocks posted their worst year in 2022 since the financial crisis, according to one analyst. David Katz, chief investment officer at Matrix Asset Advisors, told CNBC's "Street Signs Asia" that the strong start to the year "gives us a little bit more comfort in that happening." "We do think stocks have pretty good upside from here," he said. He said he expects the U.S. Federal Reserve, which was very hawkish last year, to "slow down." "We think maybe one or two more rate increases and then they're going to pause. That should give the stock market a little bit of a tailwind," Katz said on Friday. However, he added that he'll be "buying on the dip, not chasing the rallies." "We think the overall market is about fairly valued, but there are many pockets of undervaluation," Katz said. "We generally find that we're successful buying fallen angels or growth stocks that have long trajectories at value prices." "[We] recommend that investors position portfolios for better times 12 months out and play offense, not defense," he added. Stock picks Katz named four stocks he said look like quality businesses at attractive prices right now. One of them is Alphabet , which has been locked in a battle with Microsoft for leadership in the artificial intelligence market since the launch of AI bot ChatGPT, which is backed by the latter. It has sparked investor enthusiasm for AI stocks, and prompted Alphabet to launch its own rival ChatGPT. But Katz said he doesn't think Microsoft will "derail" Alphabet. "They have a very good product in terms of artificial intelligence and a good game plan," he said, of Alphabet, adding that the tech giant has "embraced investment" and will adapt to the future. "We think they're going to be a significant continued player in search, they will have a product that competes very strongly in the market," he said, adding that investors are getting the stock at a "great price" currently. Alphabet shares were down almost 10% last week, as of Friday's close. Katz also likes gas and chemical producer Air Products & Chemicals , which he said offers a "great buying opportunity." "They have a good and growing dividend and long term they are going to be a deep hydrogen play, green energy play and you're not paying too much for it," he said. Its shares have lost nearly 7% year-to-date. Katz also likes biotech company Amgen and PNC Financial Services Group .