I am quoted in Smith Brain Trust (Robert H. Smith School of Business, University of Maryland) on “Top Five Stocks to Watch in 2018”.
Bet on Berkshire, Apple, Wells Fargo, BofA and Kraft Heinz
2017 was a pretty happy year for stock investors, and David Kass says he expects 2018 to be rosy as well.
Kass, a professor of finance at the University of Maryland’s Robert H. Smith of Business, says he expects the S&P 500 and the overall stock market to climb another 10 to 15 percent this year. “And the major impetus to the increase,” he says, “is really the corporate income tax cut that will be going into effect, beginning in January, as well as the economies around the world continue to recover and as economic growth expands in the United States.”
“I expect interest rates in this country to rise only gradually,” he says, with two or three quarter-point increases over the course of the year. Investors, having long anticipated those interest rate increases, have already largely factored the impact of higher interest rates into their pricing of equities, he adds.
“Interest rates are near historically low levels and will remain relatively low, even with these increases,” Kass says. “The overall background will remain very favorable for stocks, as it was for 2017.”
Kass has closely followed the financial markets for over 50 years, and Warren Buffett’s investments and philosophy for more than 35 years. Kass says the stocks he likes in 2018 are the same ones he liked in 2017. “Like Warren Buffett, I have a long time horizon, and I’m focused on the long term when I consider investments,” he says.
Here are his top five stock picks for 2018:
Berkshire Hathaway (NYSE:BRK-A) (BRK-B). The Omaha-based conglomerate led by Buffett should be “a very major beneficiary” of the new 21 percent corporate income tax rate, approved by Congress last year. Berkshire had been paying an effective tax rate of 27.5 percent. “Plus they have common stock investments with large unrealized capital gains that they will be able to sell in 2018 or later at a lower corporate income tax rate, which reduces their deferred tax liabilities” Kass adds. The tax cut alone might add another 10 percent to the price of Berkshire Hathaway in 2018.”
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