• Laszlo Birinyi says strategists switched from worrying about inflation to fearing peak growth.  
  • He says that makes little sense, and even if growth is peaking, stocks arent doomed to sell off. 
  • He tells investors to stick to their long-term strategies and names his 10 top growth stock picks.
  • See more stories on Insiders business page.

To hear Laszlo Birinyi tell it, investors are constantly trying to talk themselves out of a good thing.

The Birinyi Associates founder says market watchers spend a lot of time warning the public that stocks are about to run into trouble, and when those warnings dont amount to much, they move on to the next potential disaster instead of appreciating what ought to be good news.

Birinyi notes how that dynamic played out recently when stocks shook off signs that rising inflation was supposed to bring disaster. He says strategists who had warned that greater inflation would tank the market moved on to warning about peak economic growth and a coming slowdown — even though that would make inflation less of a threat. 

It is now peak growth and the prospects of a slowing economy and its second derivative lower earnings that keeps them up at night, he wrote. At this point you are probably thinking to yourself, higher interest rates were bad for stocks and now lower interest rates are also bad for stocks? If this does not make sense to you, then you are not alone.

The fear of peak growth is a potent one, conjuring images of weaker earnings, a stock market downturn, and a future recession . But Birinyi, who is known for bullish trades like buying shares of Apple in early 1997 and for a consistently bullish stance during the 10-year market expansion in the 2010s, says not so fast.

In a recent note to clients, he examined 40 years of quarterly GDP data and found 16 instances of peak economic growth. He says those peaks werent associated with market turmoil, as on average the S&P 500 was 5% higher six months after those peaks and 6.5% higher a year after the peak.

If this is indeed peak growth (we are not predicting if it is or isnt), we are comfortable with it given that the market, on average (which is a very dangerous word), continues higher, he said.

While Birinyi isnt warning investors to get out or get ready for trouble, he is telling them not to jump into the latest thematic trend.

In todays market, we are being consistently bombarded by recommendations for the top re-opening stocks, infrastructure names or ESG plays. We ignore these, he said. Chasing performance is not a rewarding strategy. Instead, what has been rewarding is being patient and sticking to a discipline.

While he isnt making any dramatic shifts, he says he recently closed out a simple call trade with a huge gain. 

At the start of the year we recommended buying (and bought ourselves) the SPYDER 12/17/21 $400 Call, which opened the day after our recommendation at $13.72. As the YTD gain approaches 290% we have today sold our position ... as we get closer to the expiration of the option, time decay in the premium will start to occur.

But other than that, Birinyi says hes sticking with the stocks that have been working for him. He made only one change in his 10-stock growth portfolio: removing chipmaker Micron Technology and swapping in human resources software maker Automatic Data Processing.

That leaves the following 10 stocks that he says are enjoying a strong uptrend:

  • Abbott Laboratories (ABT)
  • Agilent Technologies (A)
  • Automatic Data Processing (ADP)
  • Microsoft (MSFT)
  • Nike (NKE)
  • PayPal (PYPL)
  • PVH Corp (PVH)
  • Starbucks (SBUX)
  • Visa (V)
  • Waste Management (WM)

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