Avoid GDP Growth Slump—Invest Here: Portfolio Manager

Stocks slipped Wednesday after a report showed housing starts fell much more than expected. Charles Crane, managing director at Douglass Winthrop Advisors, and Sarat Sethi, partner and portfolio manager at Douglas C. Lane & Associates, shared their insights.

“As the developing world gets wealthier, their demand for protein is going to grow as they can afford to buy it,” Crane told CNBC. “If there’s more meat being consumed, then there’s more corn being consumed and that’s going to require more fertilizer and farm equipments.”

As a result, Crane said companies such as Potash and Deere would benefit from the demand.

In the meantime, Sethi told investors to avoid the commodities and industrials, as he sees a slower GDP growth than expected in the next few years.

“Even if the economy improves, we’re going to see interest rates go up and cost of capital go up,” he said. “I’d rather own companies today that have good organic growth in the U.S. or overseas than wait for higher GDP, because we’re going to have too many negative things down the road to give us that higher GDP.”

Instead, investors should turn to health care and consumer staples, suggested Sethi.

He recommended companies such as Medco , Abbott Labs , Unilever and Diageo .

Scorecard—What They Said:

  • Crane's Previous Appearance on CNBC (Mar. 4, 2010)
  • Sethi's Previous Appearance on CNBC (May 6, 2010)

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Sethi owns shares of MHS, ABT, UL and DEO.

Crane owns shares of DE and POT.