Jeff Mills of the Bryn Mawr Trust sees three games that might not make you rich quick, but should bring you solid profits.
First, he would target a group that has made big profits since late last year: small caps.
“We still believe there is some space, and I think a lot of it is due to the impetus that is still in the pipeline,” the company’s chief investment officer told CNBC’s “Trading Nation” on Wednesday.
He also sees small caps continue to benefit from the pent-up demand caused by the coronavirus pandemic and purchasing power.
“Consumers are now saving $ 1.5 trillion more than they were last year,” said Mills. “We believe that all of these combined will result in better performance in areas like small caps.”
The group was a winner on Wall Street. The Russell 2000, which tracks small caps, is up more than 42% in the past six months. The rally even gained momentum in November when Pfizer and Moderna reported encouraging results for their respective Covid-19 vaccines.
Despite his bullish fall, Mills won’t rule out short-term turbulence.
“The inflows into small-cap ETFs have been quite aggressive, so I wouldn’t be surprised if we saw a little pause here,” said Mills, a CNBC official. “But that kind of dynamic, that kind of 99th percentile dynamic, is usually a really good thing for the rate of return that is expected over the next 12 months.”
His second top game: emerging markets.
“I think the dollar is still supportive there. You have this negative correlation between EM stocks and the dollar,” he said.
Mills, who manages $ 18.9 billion in assets, is broadly optimistic about the group. The iShares MSCI Emerging Markets ETF is up more than 29% in the past six months.
However, there is one caveat to his recommendation.
“I would watch China a bit. They are slowing down a bit,” he said. “But I actually think that’s a good thing to avoid this boom-bust cycle.”
Mills sees his third game with real estate mutual funds as contrary.
“It is a very uncrowded area that is benefiting from this type of economic recovery that we are still predicting,” he said.
The Real Estate Select Sector SPDR Fund fell more than 9% over the past year. But in the last month it’s up 5%.
Mills particularly likes special REITs.
“It’s now 43% of REIT indices. So these are things like communication towers, data centers, and self-storage facilities – not necessarily the companies you would think of when you think of REITs,” he said.
Mills’ investment deadlines are typically at least one year. While his selections are unlikely to be quick money games, he believes they should be embraced – especially as individual investors become a major force in the market.
“Retail investor inflows should be marginal support here,” Mills said.
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