Why the Best Investment Strategy 2016 Will Be in This Sector

Investment Strategy 2016Rising Rates Means It’s Time to Tweak Your Portfolio

Big change is coming in capital markets and the Best Investment Strategy 2016 is to play only one thing—a strong defense.

Now that we know that the Federal Reserve is keen to raise interest rates a number of quarter-points going forward, portfolio weighting will be a key attribute for outperformance going forward.

Right now, the stock market is tired, ornery, and without direction. And it will stay this way until we get into the heart of fourth-quarter earnings season—the most important news straight from the horse’s mouth. There is no wind at your portfolio’s back in this environment and accordingly, individual stock selection remains absolutely key.

I’m still a big fan of keeping a lot of assets domestic-based. Multinationals have currency woes and it’s a big deal for a company to be constantly managing derivative financial instruments to help mitigate currency fluctuations.


Plus, quite often, companies make the wrong bets, then all of a sudden there’s a big charge to earnings.

So, there are a lot of investment risks to deal with, not the least of which are rising rates., which are a very big deal for stocks.

Dear reader, in a slow-growth world with rising interest rates and currency wars, you want the healthcare sector.

Now, this is no big revelation. For many domestic-oriented portfolios, perhaps a little more weighting to this sector would be helpful as capital market cycles are changing. Within the healthcare sector universe, pharmaceuticals and medical devices are definitely worthy of consideration by investors wanting to buy in this market.

These Two Micro-Cap Stocks Have Great Potential In 2016

We’ve had very good success with Globus Medical, Inc. (NYSE:GMED). This is a micro-cap medical device company out of Audubon, PA that manufactures specialized implants for spinal disorders.

This isn’t the fastest-growing micro-cap in the marketplace, but it’s a consistent grower with continued good prospects in 2016.

Globus Medical Chart

Chart courtesy of www.StockCharts.com

In terms of new initial public offerings (IPOs), a company we recently considered in these is a vascular device company called Penumbra, Inc. (NYSE:PEN) out of Alameda, CA.

This IPO listed well above its selling price, but traded flat like so many IPOs do. Now it has some momentum behind it and I think this is another great micro-cap medical device company to watch for 2016.

Third-quarter 2015 revenues for Penumbra grew 55% to $50.3 million. The company is basically break-even in terms of profitability, because it’s investing so much in research and development, as well as new marketing employees.

Penumbra Chart

Chart courtesy of www.StockCharts.com

The Bottom Line on Beating Rising Interest Rates

The Best Investment Strategy 2016 is to consider those positions less sensitive to rising interest rates and the stronger U.S. dollar, albeit to a lesser extent.

The healthcare universe is a top sector to beat the market going forward. It includes medical devices, pharmaceuticals, and biotechnology.

It was not news that the Federal Reserve recently raised interest rates a quarter-point. The news is that it’s a big new cycle and it’s one of the reasons why I like the healthcare sector for investors. It offers a little less investment risk and more growth.

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