Jeremy Grantham bets in some stocks will protect him from ‘Superbubble’
One of the most legendary investors is seeing a bubble ready to pop out. Take a look at how he is preparing himself for it.
Jeremy Grantham, a famed investor known for correctly predicting several asset bubbles in the past, says that the current level of the S&P 500 Index is indicative of a “superbubble.”
He believes that the worst is yet to come, and his portfolio holdings reflect this belief. The majority of his investments are in companies that he believes will weather the storm and emerge stronger on the other side.
Grantham is clearly positioning himself to profit from the market downturn that he believes is coming.
In this article, we are going to be discussing some of these stocks that he believes are the best to prepare for the storm to come.
Grantham cautioned S&P 500 investors on August 31 in a message to clients that the buoyant markets in July were only preparing them for a catastrophic catastrophe.
According to Grantham, the S&P 500’s recovery of 58% of its losses from the June low in July and August corresponds with failed rallies in the past.
Meanwhile, he notes that due to inflation, rising rates, and energy constraints, corporate profit is projected to decline in the near future. Long-term issues related to low birth rates and climate change are currently beginning to have an adverse effect on economic activity.
The company Grantham works for as a strategist, Grantham, Mayo & van Otterloo (GMO), concentrates its top 10 public positions in carefully chosen blue chips and tech titans Microsoft and Apple.
Let’s dive deep into some of his options.
GMO’s public portfolio is enormous and extremely diverse, as one might anticipate from one of the pioneers of indexing. But he still has his favorites.
According to S&P Global Market Intelligence, Grantham’s portfolio consists of more than 2,200 securities.
None of those investments represent more than 3% of the total holdings. That sets him apart from Warren Buffett, who favors taking fewer, more targeted bets.
But compared to other S&P 500 stocks, Microsoft is as near to a favorite for Grantham as any. It represents about 2.7% of his whole portfolio.
There is no position that is bigger than that.
Grantham is also demonstrating greater confidence in the stock. In June, GMO increased its Microsoft holding by 6%. And it’s clear why. Up until at least 2027, the company’s earnings are expected to increase annually.
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Apple, which makes up about 2.2% of GMO’s portfolio, is the S&P 500 company with the highest level of safety, speaking of safety.
Cash security is a theme once more. The cash on hand for smartphones alone is $27.5 billion. You are looking at a corporation that is ready for a 1,000-year flood when you add in the company’s liquid investments, which total more than $150 billion.
Grantham hasn’t been spared losses, despite having enormous cash reserves. This year, shares of Apple and Microsoft have fallen by 23% and 11%, respectively.
And perhaps that is what makes Grantham’s No. 3 ranking—UnitedHealth—so appealing.
Like Apple, the operator of the health plan has a solid business and a strong balance sheet. But despite providing a 1.3% dividend yield, shares rise 2.8% this year.
But it’s vital to remember that in June, GMO reduced its stake in UnitedHealth by 24%.
Yet again, diversification is the key to Grantham’s actual safety.
His portfolio is largely protected from problems related to single companies by his ownership of thousands of S&P 500 equities. And that’s fantastic news given his pessimistic outlook.
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