Top fund manager Brian Frank believes that the current tech-driven market rally is not sustainable and will eventually come to an end. He draws parallels with the hype and subsequent crash of the market in 2021 and the tech bubble of 1999/2000. He is convinced that a recession is imminent, and investors are overlooking reliable predictors such as an inverted yield curve and negative leading economic indicators.
Brian Frank has kept his Frank Value Fund (FRNKX) invested heavily in mid-cap value stocks that he thinks are currently underappreciated by investors. Mid-caps are companies with market caps between $2 billion and $10 billion. Despite the market’s current focus on growth stocks, Frank’s mid-cap fund has outperformed 74% of its peers in 2023, according to Morningstar.
Frank is expecting the value rally to make a comeback in the coming months as valuations come back to focus while the economy continues to weaken. He is currently gravitating towards companies in the consumer staples and electric utilities sectors as they appear to be recession-resistant.
Here are seven stocks that Frank is bullish on right now as value makes a comeback in a recession:
1. Brinker International (EAT) – Market Cap: $2.7b | P/E ratio: 18.3
2. Compass Minerals (CMP) – Market Cap: $1.5b | P/E ratio: 14.1
3. Enlink Midstream (ENLC) – Market Cap: $3.1b | P/E ratio: 22.9
4. Papa John’s International (PZZA) – Market Cap: $3.9b | P/E ratio: 13.9
5. Sprouts Farmers Market (SFM) – Market Cap: $2.7b | P/E ratio: 14.8
6. The Southern Company (SO) – Market Cap: $70.6b | P/E ratio: 17.6
7. Waste Connections (WCN) – Market Cap: $33.8b | P/E ratio: 38.4
As always, Frank focuses on finding high quality and cheap small- and mid-cap companies with strong leadership teams. The key to his strategy is maintaining a concentrated portfolio that contains just 25 to 35 positions at any given time.
