Strategists say it’s a stock picker’s market right now — and name their top picks

Published Tue, Mar 7 202311:16 PM EST

Stocks are on the up this year, but it's no straightforward rally. With the path of interest rate hikes, earnings revisions and recession risks still weighing on investors' minds, markets have remained volatile. Against this backdrop, a slew of strategists are calling it a stock picker's market and advising investors to be particularly mindful of the companies they invest in. "You really do need to have discipline, but this is definitely a stock picker's market. So, it matters which stocks you own. We are very careful about where we put our money to work," Nancy Tengler, chief investment officer at Laffer Tengler Investments, told CNBC's "Street Signs Asia" on Tuesday. "All you have to do is compare Intel 's total return to the SOXX [ iShares Semiconductor ETF ] and the S & P 500 and you'll see that owning Intel was much more disastrous than owning the SOXX, which has been a great place to be," she said. The SOXX, which offers investors exposure to a basket of U.S.-listed semiconductor stocks, is up more than 20% this year. Intel's shares are down nearly 3% over the same period. Tengler's view is echoed by Michele Schneider, director of research at trading strategy firm MarketGauge. She believes the current macro backdrop is a "stock picker's scenario" that calls for "an active trading environment." She added that the market has been stuck in a trading range, with the economy "really going nowhere in the near term." And with market risks still weighing on stocks, veteran investor Michael Landsberg, partner and chief investment officer at Landsberg Bennett Private Wealth Management, said "patience, as well as careful individual stock selection, is key going forward." Stock picks Despite the outperformance of several stocks in Tengler's portfolio this year, she believes "there's still plenty of places to find high-quality companies that are growing dividends and turning in reliable earnings growth." She named Broadcom as the single largest holding across the equity strategies she manages. The chip maker is a beneficiary of the growth in cloud computing and artificial intelligence, according to Tengler. "You know you are paying for a chip stock with a lot of capacity in AI and gives great guidance and has the best margins of the semi[conductor] companies that are in the space," she added. Tengler also likes EOG Resources , with the company paying shareholders "handsome" dividends as they await the recovery in natural gas prices. The company has paid out $6.80 in special dividends per share, as well as $3 in regular dividends per share since Feb. 2022, with a further $1 in special dividends per share due in May, according to Tengler. The stock has a current dividend yield of 2.7%, higher than the industry average of 0.8%, according to FactSet data. Meanwhile, Schneider of MarketGauge is watching defense contractors Raytheon and Northrop Grumman , given they are "relatively undervalued compared to what they could be." Landsberg, meanwhile, likes pharmaceutical firm Eli Lilly , healthcare insurer UnitedHealth , and NextEra Energy — all "long-term names that offer us attractive entry points," he said.